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                                                                    EXHIBIT 10.1


                               SMARTBARGAINS, INC.
                       (FORMERLY RETAIL CONVERGENCE, INC.)

                              AMENDED AND RESTATED
            2000 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN

1.    DEFINITIONS.

      Unless otherwise specified or unless the context otherwise requires, the
      following terms, as used in this SmartBargains, Inc. (formerly Retail
      Convergence, Inc.) 2000 Employee, Director and Consultant Stock Option
      Plan, have the following meanings:

            Administrator means the Board of Directors, unless it has delegated
            power to act on its behalf to the Committee, in which case the
            Administrator means the Committee.

            Affiliate means a corporation which, for purposes of Section 424 of
            the Code, is a parent or subsidiary of the Company, direct or
            indirect.

            Award means an Option, Restricted Stock Award or other stock-based
            award granted under the Plan.

            Award Agreement means an agreement between the Company and a
            Participant delivered pursuant to the Plan, in such form as the
            Administrator shall approve.

            Board of Directors means the Board of Directors of the Company.

            Change in Control shall be deemed to have occurred upon the
            consummation of the following transactions: (a) any consolidation or
            merger of the Company (x) where the shareholders of the Company,
            immediately prior to the consolidation or merger, would not,
            immediately after the consolidation or merger, beneficially own,
            directly or indirectly, shares representing in the aggregate more
            than 80% of the combined voting power of all the outstanding
            securities of the corporation issuing cash or securities in the
            consolidation or merger (or of its ultimate parent corporation, if
            any) or (y) where the members of the Board of Directors of the
            Company, immediately prior to the consolidation or merger, would
            not, immediately after the consolidation or merger, constitute more
            than 50% of the board of directors of the corporation issuing cash
            or securities in the consolidation or merger (or of its ultimate
            parent corporation, if any), (b) any sale, lease, exchange or other
            transfer (in one transaction or a series of transactions
            contemplated or arranged by any party as a single plan) of all or
            substantially all of the assets of the Company or (c) any plan or
            proposal for the liquidation or dissolution of the Company.

            Code means the United States Internal Revenue Code of 1986, as
            amended.

            Committee means the committee of the Board of Directors to which the
            Board of Directors has delegated power to act under or pursuant to
            the provisions of the Plan.

            Common Stock means shares of the Company's common stock, $.01 par
            value per share.

            Company means SmartBargains, Inc. (formerly Retail Convergence,
            Inc.), a Delaware corporation.

            Disability or Disabled means permanent and total disability as
            defined in Section 22(e)(3) of the Code.

            Fair Market Value of a Share of Common Stock means:

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            (1) If the Common Stock is listed on a national securities exchange
            or traded in the over-the-counter market and sales prices are
            regularly reported for the Common Stock, the closing or last price
            of the Common Stock on the Composite Tape or other comparable
            reporting system for the trading day immediately preceding the
            applicable date;

            (2) If the Common Stock is not traded on a national securities
            exchange but is traded on the over-the-counter market, if sales
            prices are not regularly reported for the Common Stock for the
            trading day referred to in clause (1), and if bid and asked prices
            for the Common Stock are regularly reported, the mean between the
            bid and the asked price for the Common Stock at the close of trading
            in the over-the-counter market for the trading day on which Common
            Stock was traded immediately preceding the applicable date; and

            (3) If the Common Stock is neither listed on a national securities
            exchange nor traded in the over-the-counter market, such value as
            the Administrator, in good faith, shall determine.

            ISO means an option meant to qualify as an incentive stock option
            under Section 422 of the Code.

            Key Employee means an employee of the Company or of an Affiliate
            (including, without limitation, an employee who is also serving as
            an officer or director of the Company or of an Affiliate),
            designated by the Administrator to be eligible to be granted one or
            more Awards under the Plan.

            Non-Qualified Option means an option which is not intended to
            qualify as an ISO.

            Option means an ISO or Non-Qualified Option granted under the Plan.

            Participant means a Key Employee, director or consultant to whom one
            or more Awards are granted under the Plan. As used herein,
            "Participant" shall include "Participant's Survivors" where the
            context requires.

            Plan means this SmartBargains, Inc. (formerly Retail Convergence,
            Inc.) 2000 Employee, Director and Consultant Stock Option Plan.

            Restricted Stock Award means an award granted under the Plan
            entitling a Participant to acquire shares of Common Stock, subject
            to the right of the Company to repurchase all or part of such
            shares.

            Shares means shares of the Common Stock as to which Options have
            been or may be granted under the Plan, shares of the Common Stock
            issued pursuant to Restricted Stock Awards or any shares of capital
            stock into which the Shares are changed or for which they are
            exchanged within the provisions of Paragraph 3 of

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            the Plan. The Shares issued pursuant to the Plan may be authorized
            and unissued shares or shares held by the Company in its treasury,
            or both.

            Survivors means a deceased Participant's legal representatives
            and/or any person or persons who acquired the Participant's rights
            to an Award by will or by the laws of descent and distribution.

2.    PURPOSES OF THE PLAN.

      The Plan is intended to encourage ownership of Shares by Key Employees and
directors of and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the granting of ISOs,
Non-Qualified Options, Restricted Stock Awards and other stock-based awards.

3.    SHARES SUBJECT TO THE PLAN.

      The number of Shares which may be issued from time to time pursuant to
this Plan shall be 14,498,300, or the equivalent of such number of Shares after
the Administrator, in its sole discretion, has interpreted the effect of any
stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 17 of the Plan.

      If any Award expires or is terminated, surrendered or canceled without
having been fully exercised or is forfeited in whole or in part (including as
the result of shares of Common Stock subject to such Award being repurchased by
the Company at the original issuance price pursuant to a contractual repurchase
right) or results in any Common Stock not being issued, the unused Common Stock
covered by such Award shall again be available for the grant of Awards under the
Plan, subject, however, in the case of ISOs, to any limitations under the Code.

4.    ADMINISTRATION OF THE PLAN.

      The Administrator of the Plan will be the Board of Directors, except to
the extent the Board of Directors delegates its authority to the Committee, in
which case the Committee shall be the Administrator. Subject to the provisions
of the Plan, the Administrator is authorized to:

      a.    Interpret the provisions of the Plan or of any Award or Award
            Agreement and to make all rules and determinations which it deems
            necessary or advisable for the administration of the Plan;

      b.    Determine which employees of the Company or of an Affiliate shall be
            designated as Key Employees and which of the Key Employees,
            directors and consultants shall be granted Awards;

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      c.    Determine the number of Shares for which an Award or Awards shall be
            granted.

      d.    Specify the terms and conditions upon which an Award or Awards may
            be granted;

provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Awards which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Award granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.

5.    ELIGIBILITY FOR PARTICIPATION.

      The Administrator will, in its sole discretion, name the Participants in
the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Award is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Award to a person not then an employee, director or consultant of
the Company or of an Affiliate; provided, however, that the actual grant of such
Award shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of the delivery of the Award Agreement
evidencing such Award. ISOs may be granted only to Key Employees. Non-Qualified
Options, Restricted Stock Awards and other stock-based awards may be granted to
any Key Employee, director or consultant of the Company or an Affiliate. The
granting of any Award to any individual shall neither entitle that individual
to, nor disqualify him or her from, participation in any other grant of Awards.

6.    TERMS AND CONDITIONS OF AWARDS.

      Each Award shall be set forth in writing in an Award Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Awards be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.

      A.    Non-Qualified Options: Each Option intended to be a Non-Qualified
            Option shall be subject to the terms and conditions which the
            Administrator determines to be appropriate and in the best interest
            of the Company, subject to the following minimum standards for any
            such Non-Qualified Option:

            a.    Option Price: Each Award Agreement shall state the option
                  price (per share) of the Shares covered by each Option, which
                  option price shall be determined by the Administrator but
                  shall not be less than the par value per share of Common
                  Stock.

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            b.    Each Award Agreement shall state the number of Shares to which
                  it pertains;

            c.    Each Award Agreement shall state the date or dates on which it
                  first is exercisable and the date after which it may no longer
                  be exercised, and may provide that the Option rights accrue or
                  become exercisable in installments over a period of months or
                  years, or upon the occurrence of certain conditions or the
                  attainment of stated goals or events; and

            d.    Exercise of any Option may be conditioned upon the
                  Participant's execution of a Share purchase agreement in form
                  satisfactory to the Administrator providing for certain
                  protections for the Company and its other shareholders,
                  including requirements that:

                  i.    The Participant's or the Participant's Survivors' right
                        to sell or transfer the Shares may be restricted; and

                  ii.   The Participant or the Participant's Survivors may be
                        required to execute letters of investment intent and
                        must also acknowledge that the Shares will bear legends
                        noting any applicable restrictions.

      B.    ISOs: Each Option intended to be an ISO shall be issued only to a
            Key Employee and be subject to the following terms and conditions,
            with such additional restrictions or changes as the Administrator
            determines are appropriate but not in conflict with Section 422 of
            the Code and relevant regulations and rulings of the Internal
            Revenue Service:

            a.    Minimum standards: The ISO shall meet the minimum standards
                  required of Non-Qualified Options, as described in Paragraph
                  6(A) above, except clause (a) thereunder.

            b.    Option Price: Immediately before the Option is granted, if the
                  Participant owns, directly or by reason of the applicable
                  attribution rules in Section 424(d) of the Code:

                  i.    Ten percent (10%) or less of the total combined voting
                        power of all classes of stock of the Company or
                        an Affiliate, the Option price per share of the Shares
                        covered by each Option shall not be less than one
                        hundred percent (100%) of the Fair Market Value per
                        share of the Shares on the date of the grant of the
                        Option.

                  ii.   More than ten percent (10%) of the total combined voting
                        power of all classes of stock of the Company or an
                        Affiliate, the Option price per share of the Shares
                        covered by each Option shall not

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                        be less than one hundred ten percent (110%) of the said
                        Fair Market Value on the date of grant.

            c.    Term of Option: For Participants who own

                  i.    Ten percent (10%) or less of the total combined voting
                        power of all classes of share capital of the Company or
                        an Affiliate, each Option shall terminate not more than
                        ten (10) years from the date of the grant or at such
                        earlier time as the Award Agreement may provide.

                  ii.   More than ten percent (10%) of the total combined voting
                        power of all classes of stock of the Company or an
                        Affiliate, each Option shall terminate not more than
                        five (5) years from the date of the grant or at such
                        earlier time as the Award Agreement may provide.

            d.    Limitation on Yearly Exercise: The Award Agreements shall
                  restrict the amount of Options which may be exercisable in any
                  calendar year (under this or any other ISO plan of the Company
                  or an Affiliate) so that the aggregate Fair Market Value
                  (determined at the time each ISO is granted) of the stock with
                  respect to which ISOs are exercisable for the first time by
                  the Participant in any calendar year does not exceed one
                  hundred thousand dollars ($100,000), provided that this
                  subparagraph (d) shall have no force or effect if its
                  inclusion in the Plan is not necessary for Options issued as
                  ISOs to qualify as ISOs pursuant to Section 422(d) of the
                  Code.

      C.    Restricted Stock: Each Restricted Stock Award shall be subject to
            the terms and conditions which the Administrator determines to be
            appropriate and in the best interest of the Company, subject to the
            following minimum standards for any such Restricted Stock Award:

            a.    Repurchase Price: Each Award Agreement shall state the price
                  at which the Company may repurchase the Shares covered by each
                  Restricted Stock Award, which such price shall be determined
                  by the Administrator. As determined by the Administrator, the
                  repurchase price of such Shares may be set by formula, or if
                  such Shares are issued at no cost, such Shares may be subject
                  to mandatory forfeiture to the Company in lieu of repurchase.

            b.    Each Award Agreement shall state the number of Shares to which
                  it pertains;

            c.    Each Award Agreement shall state the terms and conditions of
                  any Restricted Stock Award, including the conditions for
                  repurchase;

            d.    Stock Certificates: Any stock certificates issued in respect
                  of a Restricted Stock Award shall be registered in the name of
                  the Participant and, unless

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                  otherwise provided for in the Award Agreement, deposited by
                  the Participant, together with a stock power endorsed in
                  blank, with the Company (or its designee). At the expiration
                  of the applicable restriction periods, the Company (or such
                  designee) shall deliver the certificates no longer subject to
                  such restrictions to the Participant or if the Participant has
                  died, to the Survivors of the Participant.

      D.    Other Stock-Based Awards: The Administrator shall have the right to
                  grant other Awards based upon the Common Stock having such
                  terms and conditions as the Administrator may determine,
                  including the grant of shares based upon certain conditions,
                  the grant of securities convertible into Common Stock and the
                  grant of stock appreciation rights.

7.    EXERCISE OF OPTIONS AND ISSUE OF SHARES.

      An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Award
Agreement. Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Award Agreement. Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars in cash or
by check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock having a Fair Market Value equal as of the date of the
exercise to the cash exercise price of the Option, or (c) at the discretion of
the Administrator, by having the Company retain from the shares otherwise
issuable upon exercise of the Option, a number of shares having a Fair Market
Value equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (e) at the discretion of the Administrator, in accordance with a
cashless exercise program established with a securities brokerage firm, and
approved by the Administrator, or (f) at the discretion of the Administrator, by
any combination of (a), (b), (c), (d) and (e) above. Notwithstanding the
foregoing, the Administrator shall accept only such payment on exercise of an
ISO as is permitted by Section 422 of the Code.

      The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance. The Shares
shall, upon delivery, be evidenced by an appropriate certificate or certificates
for fully paid, non-assessable Shares.

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      The Administrator shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.

      The Administrator may, in its discretion, amend any term or condition of
an outstanding Award provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Award was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any ISO shall be made only after
the Administrator, after consulting the counsel for the Company, determines
whether such amendment would constitute a "modification" of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or would cause
any adverse tax consequences for the holder of such ISO.

8.    RIGHTS AS A SHAREHOLDER.

      No Participant to whom an Option has been granted shall have rights as a
shareholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.

9.    ASSIGNABILITY AND TRANSFERABILITY OF AWARDS.

      By its terms, an Award granted to a Participant shall not be transferable
by the Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as otherwise determined by the Administrator and set forth
in the applicable Award Agreement. The designation of a beneficiary of an Award
by a Participant shall not be deemed a transfer prohibited by this Paragraph.
Except as provided above, an Option shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Award or of any rights granted
thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Award, shall be null and void.

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10.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR
      DEATH OR DISABILITY.

      Except as otherwise provided in the pertinent Award Agreement for the
grant of an Option, in the event of a termination of service (whether as an
employee, director or consultant) with the Company or an Affiliate before the
Participant has exercised all Options, the following rules apply:

      a.    A Participant who ceases to be an employee, director or consultant
            of the Company or of an Affiliate (for any reason other than
            termination "for cause," Disability, or death for which events there
            are special rules in Paragraphs 11, 12, and 13, respectively), may
            exercise any Option granted to him or her to the extent that the
            Option is exercisable on the date of such termination of service,
            but only within such term as the Administrator has designated in the
            pertinent Award Agreement.

      b.    Except as provided in Subparagraph (c) below, or Paragraph 12 or 13,
            in no event may an Award Agreement provide, if the Option is
            intended to be an ISO, that the time for exercise be later than
            three (3) months after the Participant's termination of employment.

      c.    The provisions of this Paragraph, and not the provisions of
            Paragraph 12 or 13, shall apply to a Participant who subsequently
            becomes Disabled or dies after the termination of employment,
            director status or consultancy, provided, however, in the case of a
            Participant's Disability or death within three (3) months after the
            termination of employment, director status or consultancy, the
            Participant or the Participant's Survivors may exercise the Option
            within one (1) year after the date of the Participant's termination
            of employment, but in no event after the date of expiration of the
            term of the Option.

      d.    Notwithstanding anything herein to the contrary, if subsequent to a
            Participant's termination of employment, termination of director
            status or termination of consultancy, but prior to the exercise of
            an Option, the Board of Directors determines that, either prior or
            subsequent to the Participant's termination, the Participant engaged
            in conduct which would constitute "cause," then such Participant
            shall forthwith cease to have any right to exercise any Option.

      e.    A Participant to whom an Option has been granted under the Plan who
            is absent from work with the Company or with an Affiliate because of
            temporary disability (any disability other than a permanent and
            total Disability as defined in Paragraph 1 hereof), or who is on
            leave of absence for any purpose, shall not, during the period of
            any such absence, be deemed, by virtue of such absence alone, to
            have terminated such Participant's employment, director status or
            consultancy with the Company or with an Affiliate, except as the
            Administrator may otherwise expressly provide.

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      f.    Except as required by law or as set forth in the pertinent Award
            Agreement, Options granted under the Plan shall not be affected by
            any change of a Participant's status within or among the Company and
            any Affiliates, so long as the Participant continues to be an
            employee, director or consultant of the Company or any Affiliate
            provided, however, if a Participant's employment by either the
            Company or an Affiliate should cease (other than to become an
            employee of an Affiliate or the Company), such termination shall be
            treated as a termination of employment.

11.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE "FOR CAUSE."

      Except as otherwise provided in the pertinent Award Agreement for the
grant of an Option, the following rules apply if the Participant's service
(whether as an employee, director or consultant) with the Company or an
Affiliate is terminated "for cause" prior to the time that all his or her
outstanding Options have been exercised:

      a.    All outstanding and unexercised Options as of the time the
            Participant is notified his or her service is terminated "for cause"
            will immediately be forfeited.

      b.    For purposes of this Plan, "cause" shall include (and is not limited
            to) dishonesty with respect to the Company or any Affiliate,
            insubordination, substantial malfeasance or non-feasance of duty,
            unauthorized disclosure of confidential information, and conduct
            substantially prejudicial to the business of the Company or any
            Affiliate. The determination of the Administrator as to the
            existence of "cause" will be conclusive on the Participant and the
            Company.

      c.    "Cause" is not limited to events which have occurred prior to a
            Participant's termination of service, nor is it necessary that the
            Administrator's finding of "cause" occur prior to termination. If
            the Administrator determines, subsequent to a Participant's
            termination of service but prior to the exercise of an Option, that
            either prior or subsequent to the Participant's termination the
            Participant engaged in conduct which would constitute "cause," then
            the right to exercise any Option is forfeited.

      d.    Any definition in an agreement between the Participant and the
            Company or an Affiliate, which contains a conflicting definition of
            "cause" for termination and which is in effect at the time of such
            termination, shall supersede the definition in this Plan with
            respect to such Participant.

12.   EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

      Except as otherwise provided in the pertinent Award Agreement for the
grant of an Option, a Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate by reason of Disability may
exercise any Option granted to such Participant:

      a.    To the extent exercisable but not exercised on the date of
            Disability; and

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      b.    In the event rights to exercise the Option accrue periodically, to
            the extent of a pro rata portion of any additional rights as would
            have accrued had the Participant not become Disabled prior to the
            end of the accrual period which next ends following the date of
            Disability. The proration shall be based upon the number of days of
            such accrual period prior to the date of Disability.

      A Disabled Participant may exercise such rights only within the period
ending one (1) year after the date the Participant became Disabled,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if the Participant had not
become Disabled and had continued to be an employee, director or consultant or,
if earlier, within the originally prescribed term of the Option.

      The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.

13.   EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

      Except as otherwise provided in the pertinent Award Agreement for the
grant of an Option, in the event of the death of a Participant while the
Participant is an employee, director or consultant of the Company or of an
Affiliate, such Option may be exercised by the Participant's Survivors:

      a.    To the extent exercisable but not exercised on the date of death;
            and

      b.    In the event rights to exercise the Option accrue periodically, to
            the extent of a pro rata portion of any additional rights which
            would have accrued had the Participant not died prior to the end of
            the accrual period which next ends following the date of death. The
            proration shall be based upon the number of days of such accrual
            period prior to the Participant's death.

      If the Participant's Survivors wish to exercise the Option, they must take
all necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.

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14.   EFFECT ON RESTRICTED STOCK AWARDS AND OTHER STOCK-BASED AWARDS OF
      TERMINATION OF SERVICE.

      The Administrator shall determine the effect on a Restricted Stock Award
and other stock-based award of the disability, death, retirement, authorized
leave of absence or other change in the employment or other status of a
Participant and the extent to which, and the period during which, the
Participant, the Participant's legal representative, conservator, guardian or
designated beneficiary may exercise rights under such Award.

15.   PURCHASE FOR INVESTMENT.

      Unless the offering and sale of the Shares to be issued pursuant to an
Award shall have been effectively registered under the Securities Act of 1933,
as now in force or hereafter amended (the "1933 Act"), the Company shall be
under no obligation to issue Shares pursuant to any Award unless and until the
following conditions have been fulfilled:

      a.    The person(s) acquiring Shares pursuant to an Award shall warrant to
            the Company, prior to the receipt of such Shares, that such
            person(s) are acquiring such Shares for their own respective
            accounts, for investment, and not with a view to, or for sale in
            connection with, the distribution of any such Shares, in which event
            the person(s) acquiring such Shares shall be bound by the provisions
            of the following legend which shall be endorsed upon the
            certificate(s) evidencing their Shares issued pursuant to such
            exercise or such grant:

                  "The shares represented by this certificate have been taken
                  for investment and they may not be sold or otherwise
                  transferred by any person, including a pledgee, unless (1)
                  either (a) a Registration Statement with respect to such
                  shares shall be effective under the Securities Act of 1933, as
                  amended, or (b) the Company shall have received an opinion of
                  counsel satisfactory to it that an exemption from registration
                  under such Act is then available, and (2) there shall have
                  been compliance with all applicable state securities laws."

      b.    At the discretion of the Administrator, the Company shall have
            received an opinion of its counsel that the Shares may be issued
            upon such particular exercise in compliance with the 1933 Act
            without registration thereunder.

16.   DISSOLUTION OR LIQUIDATION OF THE COMPANY.

      Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that

                                       12
<PAGE>

the Option is exercisable as of the date immediately prior tosuch dissolution or
liquidation. The Administrator may specify the effect of a liquidation or
dissolution on any Restricted Stock Award and any other stock-based award at the
time of grant of such Award.

17.   ADJUSTMENTS.

      Upon the occurrence of any of the following events, a Participant's rights
with respect to any Option granted to him or her hereunder which has not
previously been exercised in full, any Restricted Stock Award or other
stock-based award shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the pertinent Award Agreement:

      A. Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or if additional shares or new or different shares or
other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, (i) the number of shares of Common Stock
deliverable upon the exercise of each Option shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such events and (ii) the repurchase price
per share subject to each Restricted Stock Award and the terms of each other
outstanding stock-based award shall be appropriately adjusted, in all cases, in
the manner and to the extent the Administrator shall determine.

      B. Consolidations or Mergers; Change in Control. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"), the
Administrator or the board of directors of any entity assuming the obligations
of the Company hereunder (the "Successor Board"), shall:

      a.    As to outstanding Options, either (i) make appropriate provision for
            the continuation of such Options by substituting on an equitable
            basis for the Shares then subject to such Options either the
            consideration payable with respect to the outstanding shares of
            Common Stock in connection with the Acquisition or securities of any
            successor or acquiring entity or through the assumption of such
            Options by any successor or acquiring entity; or (ii) upon written
            notice to the Participants, provide that all Options must be
            exercised (either to the extent then exercisable or, at the
            discretion of the Administrator, all Options being made fully
            exercisable for purposes of this Subparagraph), within a specified
            number of days of the date of such notice, at the end of which
            period the Options shall terminate; or (iii) terminate all Options
            in exchange for a cash payment equal to the excess of the Fair
            Market Value of the Shares subject to such Options (either to the
            extent then exercisable or, at the discretion of the Administrator,
            all Options being made fully exercisable for purposes of this
            Subparagraph) over the exercise price thereof.

      b.    As to Restricted Stock and other stock-based awards, except as may
            be otherwise provided for in the Award Agreement, the repurchase and
            other rights of the

                                       13
<PAGE>

            Company under each outstanding Restricted Stock Award shall inure to
            the benefit of the Company's successor and shall apply to the cash,
            securities or other property which the Common Stock was converted
            into or exchanged for pursuant to such Acquisition in the same
            manner and to the same extent as they applied to the Common Stock
            subject to such Restricted Stock Award. The Administrator shall
            specify the effect of an Acquisition on any other stock-based award
            at the time of granting such Award.

      C. Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
Subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities which would have been
received if such Option had been exercised prior to such recapitalization or
reorganization.

      D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.

18.   ISSUANCES OF SECURITIES.

      Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no

                                       14
<PAGE>

adjustment by reason thereof shall be made withrespect to, the number or price
of shares subject to Awards. Except as expressly provided herein, no adjustments
shall be made for dividends paid in cash or in property (including without
limitation, securities) of the Company.

19.   FRACTIONAL SHARES.

      No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.

20.   CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

      The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such conversion,
the Administrator (with the consent of the Participant) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.

21.   WITHHOLDING.

      In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 22), the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock or a promissory note,
is authorized by the Administrator (and permitted by law). For purposes hereof,
the Fair Market Value of the shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Paragraph 1 above, as of the most
recent practicable date prior to the date of exercise. If the Fair Market Value
of the shares withheld is less than the amount of payroll withholdings required,
the Participant may be

                                       15
<PAGE>

required to advance the difference in cash to the Company or the Affiliate
employer. The Administrator in its discretion may condition the exercise of an
Option for less than the then Fair Market Value on the Participant's payment of
such additional withholding.

22.   NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

      Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.

23.   TERMINATION OF THE PLAN.

      The Plan will terminate on the date which is ten (10) years from the
earlier of the date of its adoption and the date of its approval by the
shareholders of the Company. The Plan may be terminated at an earlier date by
vote of the shareholders of the Company; provided, however, that any such
earlier termination shall not affect any Award Agreements executed prior to the
effective date of such termination.

24.   AMENDMENT OF THE PLAN AND AGREEMENTS.

      The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issued or issuable pursuant to an Award for
listing on any national securities exchange or quotation in any national
automated quotation system of securities dealers. Any amendment approved by the
Administrator which the Administrator determines is of a scope that requires
shareholder approval shall be subject to obtaining such shareholder approval.
Any modification or amendment of the Plan shall not, without the consent of a
Participant, adversely affect his or her rights under an Award previously
granted to him or her. With the consent of the Participant affected, the
Administrator may amend outstanding Award Agreements in a manner which may be
adverse to the Participant but which is not inconsistent with the Plan. In the
discretion of the Administrator, outstanding Award Agreements may be amended by
the Administrator in a manner which is not adverse to the Participant.

                                       16
<PAGE>

25.   EMPLOYMENT OR OTHER RELATIONSHIP.

      Nothing in this Plan or any Award Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, consultancy or director
status of a Participant, nor to prevent a Participant from terminating his or
her own employment, consultancy or director status or to give any Participant a
right to be retained in employment or other service by the Company or any
Affiliate for any period of time.

26.   GOVERNING LAW.

      This Plan shall be construed and enforced in accordance with the law of
the State of Delaware.

                                       17
<PAGE>
                        INCENTIVE STOCK OPTION AGREEMENT

                               SMARTBARGAINS, INC.

         AGREEMENT made as of the ___ day of _________, 200_ by and between
SmartBargains, Inc. (the "Company"), a Delaware corporation having a principal
place of business in Boston, Massachusetts and ______________ of ___________,
__, an employee of the Company (the "Employee").

         WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock, $0.01 par value per share (the "Shares"),
under and for the purposes set forth in the Company's Amended and Restated 2000
Employee, Director and Consultant Stock Option Plan (the "Plan");

         WHEREAS, the Company and the Employee understand and agree that any
terms used and not defined herein have the same meanings as in the Plan; and

         WHEREAS, the Company and the Employee each intend that the Option
granted herein qualify as an ISO.

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:

         1.       GRANT OF OPTION.

         The Company hereby grants to the Employee the right and option to
purchase all or any part of an aggregate of ______ Shares, on the terms and
conditions and subject to all the limitations set forth herein and in the Plan,
which is incorporated herein by reference. The Employee acknowledges receipt of
a copy of the Plan.

         2.       PURCHASE PRICE.

         The purchase price of the Shares covered by the Option shall be $_____
per Share, subject to adjustment, as provided in the Plan, in the event of a
stock split, reverse stock split or other events affecting the holders of Shares
(the "Exercise Price"). Payment shall be made in accordance with Paragraph 7 of
the Plan.

         3.       EXERCISABILITY OF OPTION.

         Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall become exercisable as follows: On the
first anniversary of the Employee's hire date (__/__/__) or [date of this
Agreement, as applicable], 25% of the Shares shall be exercisable, and
thereafter 6.25% of the Shares shall be exercisable on the first day of January,
April, July and October until such time as all ______ Shares are fully
exercisable. Notwithstanding the foregoing, in the event of a Change in Control
(as defined in the Plan) of the Company, subject to the other terms and
conditions set forth in this Agreement and in the Plan, then immediately prior
to the consummation of such Change of Control, the Option shall


                                       1

<PAGE>

accelerate and become exercisable with respect to an additional 12.5% of the
shares covered by the Option, and the Option shall continue in full force and
effect with respect to any Shares as to which the Option applies, whether vested
or unvested. In the event that the Employee is terminated by the Company without
"cause" (as defined below) following any such Change of Control, the Option
shall accelerate and become exercisable with respect to all of the remaining
Shares covered by the Option at the time of such termination, subject to the
other terms and conditions set forth in this Agreement and in the Plan.

         The foregoing rights are cumulative and are subject to the other terms
and conditions of this Agreement and the Plan, including without limitation
Section 16(B) of the Plan.

         4.       TERM OF OPTION.

         The Option shall terminate ten (10) years from the date of this
Agreement or, if the Employee owns as of the date hereof more than ten percent
(10%) of the total combined voting power of all classes of capital stock of the
Company or an Affiliate, five (5) years from the date of this Agreement, but
shall be subject to earlier termination as provided herein or in the Plan.

         If the Employee ceases to be an employee of the Company or of an
Affiliate (for any reason other than the death or Disability of the Employee or
termination of the Employee's employment for "cause" as defined in the Plan),
the Option may be exercised, if it has not previously terminated, within one (1)
month after the date the Employee ceases to be an employee of the Company or an
Affiliate, or within the originally prescribed term of the Option, whichever is
earlier, but may not be exercised thereafter. In such event, the Option shall be
exercisable only to the extent that the Option has become exercisable and is in
effect at the date of such cessation of employment.

         Notwithstanding the foregoing, in the event of the Employee's
Disability or death within one (1) month after the termination of employment,
the Employee or the Employee's Survivors may exercise the Option within one (1)
year after the date of the Employee's termination of employment, but in no event
after the date of expiration of the term of the Option.

         In the event the Employee's employment is terminated by the Employee's
employer for "cause" as defined in the Plan, the Employee's right to exercise
any unexercised portion of this Option shall cease as of such termination, and
this Option shall thereupon terminate. Notwithstanding anything herein to the
contrary, if subsequent to the Employee's termination as an employee, but prior
to the exercise of the Option, the Board of Directors of the Company determines
that, either prior or subsequent to the Employee's termination, the Employee
engaged in conduct which would constitute "cause," then the Employee shall
immediately cease to have any right to exercise the Option and this Option shall
thereupon terminate.

         In the event of the Disability of the Employee, as determined in
accordance with the Plan, the Option shall be exercisable within one (1) year
after the date of Disability or, if earlier, within the term originally
prescribed by the Option. In such event, the Option shall be exercisable:

         (a)      to the extent exercisable but not exercised as of the date of
                  Disability; and


                                       2

<PAGE>

         (b)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Employee not become Disabled prior to the end of the
                  accrual period which next ends following the date of
                  Disability. The proration shall be based upon the number of
                  days during the accrual period prior to the date of
                  Disability.

         In the event of the death of the Employee while an employee of the
Company or of an Affiliate, the Option shall be exercisable by the Participant's
Survivors within one (1) year after the date of death of the Employee or, if
earlier, within the originally prescribed term of the Option. In such event, the
Option shall be exercisable:

         (x)      to the extent exercisable but not exercised as of the date of
                  death; and

         (y)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Employee not died prior to the end of the accrual
                  period which next ends following the date of death. The
                  proration shall be based upon the number of days during the
                  accrual period prior to the Employee's death.

For the purposes of this Agreement, "cause" shall mean dishonesty with respect
to the Company or any affiliate, insubordination, substantial malfeasance or non
feasance of duty, unauthorized disclosure of confidential information and
conduct substantially prejudicial to the business of the Company or any
affiliate. The determination of the Board of Directors as to the existence of
"cause" will be conclusive on the Employee and the Company, provided notice is
given to the Employee and the Employee is provided with the opportunity to be
heard by the Board.

         5.       METHOD OF EXERCISING OPTION.

         Subject to the terms and conditions of this Agreement, the Option may
be exercised by written notice to the Company at its principal executive office,
in substantially the form of Exhibit A attached hereto. Such notice shall state
the number of Shares with respect to which the Option is being exercised and
shall be signed by the person exercising the Option. Payment of the purchase
price for such Shares shall be made in accordance with Paragraph 7 of the Plan.
The Company shall deliver a certificate or certificates representing such Shares
as soon as practicable after the notice shall be received, provided, however,
that the Company may delay issuance of such Shares until completion of any
action or obtaining of any consent, which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws). The certificate or certificates for the Shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and another person
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised, pursuant to Section 4 hereof, by any person
or persons other than the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.

         6.       PARTIAL EXERCISE.

         Exercise of this Option to the extent above stated may be made in part
at any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.


                                        3

<PAGE>

         7.       NON-ASSIGNABILITY.

         The Option shall not be transferable by the Employee otherwise than by
will or by the laws of descent and distribution. The Option shall be
exercisable, during the Employee's lifetime, only by the Employee (or, in the
event of legal incapacity or incompetency, by the Employee's guardian or
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option or of any rights
granted hereunder contrary to the provisions of this Section 7, or the levy of
any attachment or similar process upon the Option shall be null and void.

         8.       NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

         The Employee shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company's share register in the name of the Employee. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

         9.       CAPITAL CHANGES AND BUSINESS SUCCESSIONS.

         The Plan contains provisions covering the treatment of Options in a
number of contingencies such as stock splits and mergers. Provisions in the Plan
for adjustment with respect to stock subject to Options and the related
provisions with respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by reference.

         10.      TAXES.

         The Employee acknowledges that any income or other taxes due from him
or her with respect to this Option or the Shares issuable pursuant to this
Option shall be the Employee's responsibility.

         In the event of a Disqualifying Disposition (as defined in Section 15
below) or if the Option is converted into a Non-Qualified Option and such
Non-Qualified Option is exercised, the Company may withhold from the Employee's
remuneration, if any, the appropriate amount of federal, state and local
withholding taxes attributable to such amount that is considered compensation
includible in such person's gross income. At the Company's discretion, the
amount required to be withheld may be withheld in cash from such remuneration,
or in kind from the Shares otherwise deliverable to the Employee on exercise of
the Option. The Employee further agrees that, if the Company does not withhold
an amount from the Employee's remuneration sufficient to satisfy the Company's
income tax withholding obligation, the Employee will reimburse the Company on
demand, in cash, for the amount under-withheld.


                                       4

<PAGE>

         11.      PURCHASE FOR INVESTMENT.

         Unless the offering and sale of the Shares to be issued upon the
particular exercise of the Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the
"Securities Act"), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been
fulfilled:

         (a)      The person(s) who exercise the Option shall warrant to the
                  Company, at the time of such exercise, that such person(s) are
                  acquiring such Shares for their own respective accounts, for
                  investment, and not with a view to, or for sale in connection
                  with, the distribution of any such Shares, in which event the
                  person(s) acquiring such Shares shall be bound by the
                  provisions of the following legend which shall be endorsed
                  upon the certificate(s) evidencing the Shares issued pursuant
                  to such exercise:

                           "The shares represented by this certificate have been
                           taken for investment and they may not be sold or
                           otherwise transferred by any person, including a
                           pledgee, unless (1) either (a) a Registration
                           Statement with respect to such shares shall be
                           effective under the Securities Act of 1933, as
                           amended, or (b) the Company shall have received an
                           opinion of counsel satisfactory to it that an
                           exemption from registration under such Act is then
                           available, and (2) there shall have been compliance
                           with all applicable state securities laws;" and

         (b)      If the Company so requires, the Company shall have received an
                  opinion of its counsel that the Shares may be issued upon such
                  particular exercise in compliance with the 1933 Act without
                  registration thereunder. Without limiting the generality of
                  the foregoing, the Company may delay issuance of the Shares
                  until completion of any action or obtaining of any consent,
                  which the Company deems reasonably necessary under any
                  applicable law (including without limitation state securities
                  or "blue sky" laws).

         12.      RESTRICTIONS ON TRANSFER OF SHARES.

         12.1 The Shares acquired by the Employee pursuant to the exercise of
the Option granted hereby shall not be transferred by the Employee except as
permitted herein.

         12.2 In the event of the Employee's termination of employment for any
reason, Disability or death, the Company shall have the option, but not the
obligation, to repurchase all or any part of the Shares issued pursuant to this
Agreement (including, without limitation, Shares purchased after termination of
employment, Disability or death in accordance with Section 4 hereof). In the
event the Company does not, upon the termination, Disability or death of the
Employee (as described above), exercise its option pursuant to this Section
12.2, the restrictions set forth in the balance of this Agreement shall not
thereby lapse, and the Employee for himself or herself, his or her heirs,
legatees, executors, administrators and other successors in interest, agrees
that the Shares shall remain subject to such restrictions. The following
provisions shall apply to a repurchase under this Section 12.2:


                                       5

<PAGE>

         (i) The per share repurchase price of the Shares to be sold to the
Company upon exercise of its option under this Section 12.2 shall be equal to
the Fair Market Value of each such Share determined in accordance with Plan as
of the date of termination, Disability or death. Notwithstanding the foregoing,
in the event the Participant's termination of employment is for cause, the
Company shall have the right to repurchase the Shares at the cash Exercise Price
of the Option.

         (ii) The Company's option to repurchase the Employee's Shares in the
event of termination of employment, Disability or death shall be valid for a
period of sixty (60) days commencing with the date of such termination of
employment.

         (iii) In the event the Company shall be entitled to and shall elect to
exercise its option to repurchase the Employee's Shares under this Section 12.2,
the Company shall notify the Employee, or in case of death, his or her
representative, in writing of its intent to repurchase the Shares. Such written
notice may be mailed by the Company up to and including the last day of the time
period provided for in Section 12.2(ii) for exercise of the Company's option to
repurchase.

         (iv) The written notice to the Employee shall specify the address at,
and the time and date on, which payment of the repurchase price is to be made
(the "Closing"). The date specified shall not be less than ten (10) days nor
more than sixty (60) days from the date of the mailing of the notice, and the
Employee or his or her successor in interest with respect to the Shares shall
have no further rights as the owner thereof from and after the date specified in
the notice. At the Closing, the repurchase price shall be delivered to the
Employee or his or her successor in interest and the Shares being purchased,
duly endorsed for transfer, shall, to the extent that they are not then in the
possession of the Company, be delivered to the Company by the Employee or his or
her successor in interest.

         (v) If the Shares are not listed on a national securities exchange nor
traded in the over the counter market, then for the purposes of this Section
12.2, Fair Market Value shall mean such value as the Administrator, in good
faith, shall determine, and, provided, however, that if, the Employee objects to
the good faith determination of the Administrator, then the Employee and the
Company shall promptly and mutually select an investment banking firm, certified
public accountant or business appraisal firm (the "Independent Appraiser") to
determine the Fair Market Value. The Company shall promptly furnish to the
Independent Appraiser such information concerning the Company's operations,
assets and properties, financial condition, earnings, capitalization and sales
of its capital stock, and any offers or indication of interest received by the
Company, as the Independent Appraiser may request or the parties may deem
relevant. The Fair Market Value as determined by the Independent Appraiser
(which determination the Independent Appraiser shall be instructed to render in
writing within thirty (30) days following the selection of such Independent
Appraiser) shall be binding upon the Employee and the Company. The fees and
expenses of the Independent Appraiser shall be borne by the Company.

         12.3 It shall be a condition precedent to the validity of any sale or
other transfer of any Shares by the Employee that the following restrictions be
complied with (except as hereinafter otherwise provided):


                                       6

<PAGE>

         (i)      No Shares owned by the Employee may be sold, pledged or
                  otherwise transferred (including by gift or devise) to any
                  person or entity, voluntarily, or by operation of law, except
                  in accordance with the terms and conditions hereinafter set
                  forth.

         (ii)     Before selling or otherwise transferring all or part of the
                  Shares, the Employee shall give written notice of such
                  intention to the Company, which notice shall include the name
                  of the proposed transferee, the proposed purchase price per
                  share, the terms of payment of such purchase price and all
                  other matters relating to such sale or transfer and shall be
                  accompanied by a copy of the binding written agreement of the
                  proposed transferee to purchase the Shares of the Employee.
                  Such notice shall constitute a binding offer by the Employee
                  to sell to the Company such number of the Shares then held by
                  the Employee as are proposed to be sold in the notice at the
                  monetary price per share designated in such notice, payable on
                  the terms offered to the Employee by the proposed transferee
                  (provided, however, that the Company shall not be required to
                  meet any non-monetary terms of the proposed transfer,
                  including, without limitation, delivery of other securities in
                  exchange for the Shares proposed to be sold). The Company
                  shall give written notice to the Employee as to whether such
                  offer has been accepted in whole by the Company within twenty
                  (20) days after its receipt of written notice from the
                  Employee. The Company may only accept such offer in whole and
                  may not accept such offer in part. Such acceptance notice
                  shall fix a time, location and date for the closing on such
                  purchase ("Closing Date") which shall not be less than ten
                  (10) nor more than sixty (60) days after the giving of the
                  acceptance notice. The place for such closing shall be at the
                  Company's principal office. At such closing, the Employee
                  shall accept payment as set forth herein and shall deliver to
                  the Company in exchange therefor certificates for the number
                  of Shares stated in the notice accompanied by duly executed
                  instruments of transfer.

         (iii)    If the Company shall fail to accept any such offer, the
                  Employee shall be free to sell all, but not less than all, of
                  the Shares set forth in his or her notice to the designated
                  transferee at the price and terms designated in the Employee's
                  notice, provided that (i) such sale is consummated within six
                  (6) months after the giving of notice by the Employee to the
                  Company as aforesaid, and (ii) the transferee first agrees in
                  writing to be bound by the provisions of this Section 12 so
                  that such transferee (and all subsequent transferees) shall
                  thereafter only be permitted to sell or transfer the Shares in
                  accordance with the terms hereof. After the expiration of such
                  six (6) months, the provisions of this Section 12.3 shall
                  again apply with respect to any proposed voluntary transfer of
                  the Employee's Shares.

         (iv)     The restrictions on transfer contained in this Section 12.3
                  shall not apply to (a) transfers by the Employee to his or her
                  spouse or children or to a trust for the benefit of his or her
                  spouse or children, (b) transfers by the Employee to his or
                  her guardian or conservator, and (c) or transfers by the
                  Employee, in the event of his or her death, to his or her
                  executor(s) or administrator(s) or to trustee(s) under his or
                  her will (collectively, "Permitted Transferees"); provided
                  however, that in any such event the Shares so transferred in
                  the hands of each such Permitted Transferee shall remain
                  subject to this Agreement, and each such Permitted


                                       7

<PAGE>

                  Transferee shall so acknowledge in writing as a condition
                  precedent to the effectiveness of such transfer.

         (v)      The provisions of this Section 12.3 may be waived upon such
                  conditions as the Company may impose.

         12.4 In the event that the Employee or his or her successor in interest
fails to deliver the Shares to be repurchased by the Company under this
Agreement, the Company may elect (a) to establish a segregated account in the
amount of the repurchase price, such account to be turned over to the Employee
or his or her successor in interest upon delivery of such Shares, and (b)
immediately to take such action as is appropriate to transfer record title of
such Shares from the Employee to the Company and to treat the Employee and such
Shares in all respects as if delivery of such Shares had been made as required
by this Agreement. The Employee hereby irrevocably grants the Company a power of
attorney which shall be coupled with an interest for the purpose of effectuating
the preceding sentence.

         12.5 If the Company shall pay a stock dividend or declare a stock split
on or with respect to any of its Common Stock, or otherwise distribute
securities of the Company to the holders of its Common Stock, the number of
shares of stock or other securities of Company issued with respect to the shares
then subject to the restrictions contained in this Agreement shall be added to
the Shares subject to the Company's rights to repurchase pursuant to this
Agreement. If the Company shall distribute to its stockholders shares of stock
of another corporation, the shares of stock of such other corporation,
distributed with respect to the Shares then subject to the restrictions
contained in this Agreement, shall be added to the Shares subject to the
Company's rights to repurchase pursuant to this Agreement.

         12.6 If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to a merger,
consolidation or capital reorganization, there shall be substituted for the
Shares then subject to the restrictions contained in this Agreement such amount
and kind of securities as are issued in such subdivision, combination,
reclassification, merger, consolidation or capital reorganization in respect of
the Shares subject immediately prior thereto to the Company's rights to
repurchase pursuant to this Agreement.

         12.7 The Company shall not be required to transfer any Shares on its
books which shall have been sold, assigned or otherwise transferred in violation
of this Agreement, or to treat as owner of such Shares, or to accord the right
to vote as such owner or to pay dividends to, any person or organization to
which any such Shares shall have been so sold, assigned or otherwise
transferred, in violation of this Agreement.

         12.8 The provisions of Sections 12.1, 12.2 and 12.3 shall terminate
upon the effective date of the initial public offering of the Company's
securities pursuant to the Securities Act.

         12.9 If, in connection with a registration statement filed by the
Company pursuant to the Securities Act relating to an underwritten public
offering of the Company's securities, the Company or its underwriter so
requests, the Employee will agree not to sell any Shares for a


                                       8

<PAGE>

period not to exceed 180 days following the effectiveness of such registration
(but not greater than the period applicable to all executive officers and
directors of the Company).

         12.10 The Employee acknowledges and agrees, except in connection with
the exercise of his Options, that neither the Company, its shareholders nor its
directors and officers, has any duty or obligation to disclose to the Employee
any material information regarding the business of the Company or affecting the
value of the Shares before, at the time of, or following a termination of the
employment of the Employee by the Company, including, without limitation, any
information concerning plans for the Company to make a public offering of its
securities or to be acquired by or merged with or into another firm or entity.

         12.11 All certificates representing the Shares to be issued to the
Employee pursuant to this Agreement shall have endorsed thereon a legend
substantially as follows: "The shares represented by this certificate are
subject to restrictions set forth in an Incentive Stock Option Agreement dated
_________, 200_ with this Company, a copy of which Agreement is available for
inspection at the offices of the Company or will be made available upon
request."

         13.      NO OBLIGATION TO EMPLOY.

         The Company is not, by the Plan or this Option, obligated to continue
the Employee as an employee of the Company.

         14.      OPTION IS INTENDED TO BE AN ISO.

         The parties each intend that the Option be an ISO so that the Employee
(or the Employee's Survivors) may qualify for the favorable tax treatment
provided to holders of Options that meet the standards of Section 422 of the
Code. Any provision of this Agreement or the Plan which conflicts with the Code
so that this Option would not be deemed an ISO is null and void and any
ambiguities shall be resolved so that the Option qualifies as an ISO.
Nonetheless, if the Option is determined not to be an ISO, the Employee
understands that neither the Company nor any Affiliate is responsible to
compensate him or her or otherwise make up for the treatment of the Option as a
Non-qualified Option and not as an ISO. The Employee should consult with the
Employee's own tax advisors regarding the tax effects of the Option and the
requirements necessary to obtain favorable tax treatment under Section 422 of
the Code, including, but not limited to, holding period requirements.

         15.      NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

         The Employee agrees to notify the Company in writing immediately after
the Employee makes a Disqualifying Disposition of any of the Shares acquired
pursuant to the exercise of the Option. A Disqualifying Disposition is defined
in Section 424(c) of the Code and includes any disposition (including any sale)
of such Shares before the later of (a) two years after the date the Employee was
granted the Option or (b) one year after the date the Employee acquired Shares
by exercising the Option, except as otherwise provided in Section 424(c) of the
Code. If the Employee has died before the Shares are sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.


                                       9

<PAGE>

         16.      NOTICES.

         Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:

If to the Company:                  SmartBargains, Inc.
                                    10 Milk Street, 10th Floor
                                    Boston, MA  02108
                                    Attention:  Chief Financial Officer


If to the Employee:



or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service, or three business days following mailing by registered or
certified mail.

         17.      GOVERNING LAW.

         This Agreement shall be construed and enforced in accordance with the
law of the State of Delaware, without giving effect to the conflict of law
principles thereof.

         18.      BENEFIT OF AGREEMENT.

         Subject to the provisions of the Plan and the other provisions hereof,
this Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.

         19.      ENTIRE AGREEMENT.

         This Agreement, together with the Plan, embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this Agreement shall affect or
be used to interpret, change, or restrict the express terms and provisions of
this Agreement, provided, however, in any event, this Agreement shall be subject
to and governed by the Plan.

         20.      MODIFICATIONS AND AMENDMENTS.

         The terms and provisions of this Agreement may be modified or amended
as provided in the Plan.


                                       10

<PAGE>

         21.      WAIVERS AND CONSENTS.

         Except as provided in the Plan, the terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only by
written document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Employee has hereunto set his
or her hand, all as of the day and year first above written.

                                   SmartBargains, Inc.



                                   By: _______________________________
                                       Stephen M. Joseph
                                       Executive Vice President
                                       Chief Financial Officer




                                   ___________________________________
                                   Employee


                                       11

<PAGE>

                                                                       Exhibit A

                  NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

                         [FORM FOR UNREGISTERED SHARES]

To: SmartBargains, Inc.


Ladies and Gentlemen:

         I hereby exercise my Incentive Stock Option to purchase ___________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $____ per share, pursuant to and
subject to the terms of that certain Incentive Stock Option Agreement between
the undersigned and the Company dated ________________, 200__.

         I am aware that the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or any state securities
laws. I understand that the reliance by the Company on exemptions under the 1933
Act is predicated in part upon the truth and accuracy of the statements by me in
this Notice of Exercise.

         I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Shares; (2) I have had the opportunity to ask questions
concerning the Shares and the Company and all questions posed have been answered
to my satisfaction; (3) I have been given the opportunity to obtain any
additional information I deem necessary to verify the accuracy of any
information obtained concerning the Shares and the Company; and (4) I have such
knowledge and experience in financial and business matters that I am able to
evaluate the merits and risks of purchasing the Shares and to make an informed
investment decision relating thereto.

         I hereby represent and warrant that I am purchasing the Shares for my
own personal account for investment and not with a view to the sale or
distribution of all or any part of the Shares.

         I understand that because the Shares have not been registered under the
1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Shares cannot be sold unless the Shares are subsequently
registered under applicable federal and state securities laws or an exemption
from such registration requirements is available.

         I agree that I will in no event sell or distribute or otherwise dispose
of all or any part of the Shares unless (1) there is an effective registration
statement under the 1933 Act and applicable state securities laws covering any
such transaction involving the Shares or (2) the Company receives an opinion of
my legal counsel (concurred in by legal counsel for the Company) stating that
such transaction is exempt from registration or the Company otherwise satisfies
itself that such transaction is exempt from registration.


                                       12

<PAGE>

         I consent to the placing of a legend on my certificate for the Shares
stating that the Shares have not been registered and setting forth the
restriction on transfer contemplated hereby and to the placing of a stop
transfer order on the books of the Company and with any transfer agents against
the Shares until the Shares may be legally resold or distributed without
restriction.

         I understand that at the present time Rule 144 of the Securities and
Exchange Commission (the "SEC") may not be relied on for the resale or
distribution of the Shares by me. I understand that the Company has no
obligation to me to register the sale of the Shares with the SEC and has not
represented to me that it will register the sale of the Shares.

         I understand the terms and restrictions on the right to dispose of the
Shares set forth in the 2000 Employee, Director and Consultant Stock Option
Plan, as amended and the Incentive Stock Option Agreement, both of which I have
carefully reviewed. I consent to the placing of a legend on my certificate for
the Shares referring to such restriction and the placing of stop transfer orders
until the Shares may be transferred in accordance with the terms of such
restrictions.

         I have considered the Federal, state and local income tax implications
of the exercise of my Option and the purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                    ________________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ________________, as joint tenants with right of

survivorship and mail the certificate to me at the following address:


___________________________________________

___________________________________________

___________________________________________


                                       13

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above is:

___________________________________________

___________________________________________

___________________________________________


                                        Very truly yours,


                                        _____________________________________
                                        Employee (signature)


                                        _____________________________________
                                        Print Name


                                        _____________________________________
                                        Date


                                        _____________________________________
                                        Social Security Number



                                       14

<PAGE>

                                                                       Exhibit A

                  NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

                          [FORM FOR REGISTERED SHARES]

TO: SmartBargains, Inc.

IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time
as the Company has filed a Registration Statement with the Securities and
Exchange Commission under which the issuance of the Shares for which this
exercise is being made is registered and such Registration Statement remains
effective.

Ladies and Gentlemen:

         I hereby exercise my Incentive Stock Option to purchase _________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $________ per share, pursuant to
and subject to the terms of that certain Incentive Stock Option Agreement
between the undersigned and the Company dated _______________, 200__.

         I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                  ____________________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ____________________________, as joint tenants with right

of survivorship, and mail the certificate to me at the following address:


___________________________________________

___________________________________________

___________________________________________


                                       15

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above, is:

___________________________________________

___________________________________________

___________________________________________


                                        Very truly yours,


                                        _____________________________________
                                        Employee (signature)


                                        _____________________________________
                                        Print Name


                                        _____________________________________
                                        Date


                                        _____________________________________
                                        Social Security Number



                                       16

<PAGE>
                      NON-QUALIFIED STOCK OPTION AGREEMENT

                               SMARTBARGAINS, INC.

         AGREEMENT made as of the ____ day of __________ 200_, by and between
SmartBargains, Inc. (the "Company"), a Delaware corporation having a principal
place of business in Boston, Massachusetts and _________________of
_________________, ________ (the "Participant").

         WHEREAS, the Company desires to grant to the Participant an option (the
"Option") to purchase shares of its common stock, $0.01 par value per share (the
"Shares"), under and for the purposes set forth in the Company's Amended and
Restated 2000 Participant, Director and Consultant Stock Option Plan (the
"Plan");

         WHEREAS, the Company and the Participant understand and agree that any
terms used and not defined herein have the same meanings as in the Plan; and

         WHEREAS, the Company and the Participant each intend that the Option
granted herein does not qualify as an incentive stock option ("ISO") under
Section 422 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code").

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:

         1.       GRANT OF OPTION.

         The Company hereby grants to the Participant the right and option to
purchase all or any part of an aggregate of _____________________________
(__________) Shares, on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. The Participant acknowledges receipt of a copy of the Plan.

         2.       PURCHASE PRICE.

         The purchase price of the Shares covered by the Option shall be $.36
per Share, subject to adjustment, as provided in the Plan, in the event of a
stock split, reverse stock split or other events affecting the holders of Shares
(the "Exercise Price"). Payment shall be made in accordance with Paragraph 7 of
the Plan.

         3.       EXERCISABILITY OF OPTION.

         Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall become exercisable as follows: On the
first anniversary of the date of this Agreement [OR DATE OF HIRE, AS APPLICABLE]
(__________), 25% of the Shares shall be exercisable, and thereafter 6.25% of
the Shares shall be exercisable on the first day of January, April, July and
October until such time as all 100,000 Shares are fully exercisable.


<PAGE>

Notwithstanding the foregoing, in the event of a Change in Control (as defined
in the Plan) of the Company, subject to the other terms and conditions set forth
in this Agreement and in the Plan, then immediately prior to the consummation of
such Change of Control, the Option shall accelerate and become exercisable with
respect to an additional 12.5% of the shares covered by the Option, and the
Option shall continue in full force and effect with respect to any Shares as to
which the Option applies, whether vested or unvested. In the event that the
Participant's employment, directorship or consultancy is terminated by the
Company without "cause" (as defined below) following any such Change of Control,
the Option shall accelerate and become exercisable with respect to all of the
remaining Shares covered by the Option at the time of such termination, subject
to the other terms and conditions set forth in this Agreement and in the Plan.

         The foregoing rights are cumulative and are subject to the other terms
and conditions of this Agreement and the Plan, including without limitation
Section 16(B) of the Plan.

         4.       TERM OF OPTION.

         The Option shall terminate ten (10) years from the date of this
Agreement.

         If the Participant ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than the death or
Disability of the Participant or termination of Participant for "cause" as
defined in the Plan), the Option may be exercised, if it has not previously
terminated, within one (1) month after the date the Participant ceases to be an
employee, director or consultant of the Company or an Affiliate, or within the
originally prescribed term of the Option, whichever is earlier, but may not be
exercised thereafter. In such event, the Option shall be exercisable only to the
extent that the Option has become exercisable and is in effect at the date of
such cessation of employment, directorship or consultancy.

         Notwithstanding the foregoing, in the event of the Participant's
Disability or death within one (1) month after the termination of employment,
directorship or consultancy, the Participant or the Participant's Survivors may
exercise the Option within one (1) year after the date of the Participant's
termination of employment, directorship or consultancy, but in no event after
the date of expiration of the term of the Option.

         In the event the Participant's employment, directorship or consultancy
is terminated by the Participant's employer for "cause" as defined in the Plan,
the Participant's right to exercise any unexercised portion of this Option shall
cease as of such termination, and this Option shall thereupon terminate.
Notwithstanding anything herein to the contrary, if subsequent to the
Participant's termination, but prior to the exercise of the Option, the Board of
Directors of the Company determines that, either prior or subsequent to the
Participant's termination, the Participant engaged in conduct which would
constitute "cause," then the Participant shall immediately cease to have any
right to exercise the Option and this Option shall thereupon terminate.

         In the event of the Disability of the Participant, as determined in
accordance with the Plan, the Option shall be exercisable within one (1) year
after the date of Disability or, if earlier, within the term originally
prescribed by the Option. In such event, the Option shall be


                                       2

<PAGE>

exercisable:

         (a)      to the extent exercisable but not exercised as of the date of
                  Disability; and

         (b)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Participant not become Disabled prior to the end of
                  the accrual period which next ends following the date of
                  Disability. The proration shall be based upon the number of
                  days during the accrual period prior to the date of
                  Disability.

         In the event of the death of the Participant while an employee,
director or consultant of the Company or of an Affiliate, the Option shall be
exercisable by the Participant's Survivors within one (1) year after the date of
death of the Participant or, if earlier, within the originally prescribed term
of the Option. In such event, the Option shall be exercisable:

         (x)      to the extent exercisable but not exercised as of the date of
                  death; and

         (y)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Participant not died prior to the end of the accrual
                  period which next ends following the date of death. The
                  proration shall be based upon the number of days during the
                  accrual period prior to the Participant's death.

         5.       METHOD OF EXERCISING OPTION.

         Subject to the terms and conditions of this Agreement, the Option may
be exercised by written notice to the Company at its principal executive office,
in substantially the form of Exhibit A attached hereto. Such notice shall state
the number of Shares with respect to which the Option is being exercised and
shall be signed by the person exercising the Option. Payment of the purchase
price for such Shares shall be made in accordance with Paragraph 7 of the Plan.
The Company shall deliver a certificate or certificates representing such Shares
as soon as practicable after the notice shall be received, provided, however,
that the Company may delay issuance of such Shares until completion of any
action or obtaining of any consent, which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws). The certificate or certificates for the Shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Participant and if the Participant shall so request in the notice exercising the
Option, shall be registered in the name of the Participant and another person
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised, pursuant to Section 4 hereof, by any person
or persons other than the Participant, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.



                                       3

<PAGE>

         6.       PARTIAL EXERCISE.

         Exercise of this Option to the extent above stated may be made in part
at any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.

         7.       NON-ASSIGNABILITY.

         The Option shall not be transferable by the Participant otherwise than
by will or by the laws of descent and distribution. The Option shall be
exercisable, during the Participant's lifetime, only by the Participant (or, in
the event of legal incapacity or incompetency, by the Participant's guardian or
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option or of any rights
granted hereunder contrary to the provisions of this Section 7, or the levy of
any attachment or similar process upon the Option shall be null and void.

         8.       NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

         The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company's share register in the name of the Participant. Except as expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

         9.       CAPITAL CHANGES AND BUSINESS SUCCESSIONS.

                  The Plan contains provisions covering the treatment of Options
in a number of contingencies such as stock splits and mergers. Provisions in the
Plan for adjustment with respect to stock subject to Options and the related
provisions with respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by reference.

         10.      TAXES.

         The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement. The Participant
acknowledges that any income or other taxes due from him or her with respect to
this Option or the Shares issuable pursuant to this Option shall be the
Participant's responsibility.

         In the event of an exercise of this Option, the Company may withhold
from the Participant's remuneration, if any, the appropriate amount of federal,
state and local withholding taxes attributable to such amount that is considered
compensation includible in such person's gross income. At the Company's
discretion, the amount required to be withheld may be


                                       4

<PAGE>

withheld in cash from such remuneration, or in kind from the Shares otherwise
deliverable to the Participant on exercise of the Option. The Participant
further agrees that, if the Company does not withhold an amount from the
Participant's remuneration sufficient to satisfy the Company's income tax
withholding obligation, the Participant will reimburse the Company on demand, in
cash, for the amount under-withheld.

         11.      PURCHASE FOR INVESTMENT.

         Unless the offering and sale of the Shares to be issued upon the
particular exercise of the Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the
"Securities Act"), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been
fulfilled:

         (a)      The person(s) who exercise the Option shall warrant to the
                  Company, at the time of such exercise, that such person(s) are
                  acquiring such Shares for their own respective accounts, for
                  investment, and not with a view to, or for sale in connection
                  with, the distribution of any such Shares, in which event the
                  person(s) acquiring such Shares shall be bound by the
                  provisions of the following legend which shall be endorsed
                  upon the certificate(s) evidencing the Shares issued pursuant
                  to such exercise:

                           "The shares represented by this certificate have been
                           taken for investment and they may not be sold or
                           otherwise transferred by any person, including a
                           pledgee, unless (1) either (a) a Registration
                           Statement with respect to such shares shall be
                           effective under the Securities Act of 1933, as
                           amended, or (b) the Company shall have received an
                           opinion of counsel satisfactory to it that an
                           exemption from registration under such Act is then
                           available, and (2) there shall have been compliance
                           with all applicable state securities laws;" and

         (b)      If the Company so requires, the Company shall have received an
                  opinion of its counsel that the Shares may be issued upon such
                  particular exercise in compliance with the 1933 Act without
                  registration thereunder. Without limiting the generality of
                  the foregoing, the Company may delay issuance of the Shares
                  until completion of any action or obtaining of any consent,
                  which the Company deems reasonably necessary under any
                  applicable law (including without limitation state securities
                  or "blue sky" laws).

         12.      RESTRICTIONS ON TRANSFER OF SHARES.

         12.1 The Shares acquired by the Participant pursuant to the exercise of
the Option granted hereby shall not be transferred by the Participant except as
permitted herein.

         12.2 In the event of the Participant's termination of employment,
directorship or consultancy for any reason, death or Disability, the Company
shall have the option, but not the obligation, to repurchase all or any part of
the Shares issued pursuant to this Agreement


                                       5

<PAGE>

(including, without limitation, Shares purchased after termination of
employment, Disability or death in accordance with Section 4 hereof). In the
event the Company does not, upon the termination of Participant's employment,
directorship or consultancy, Disability or death (as described above), exercise
its option pursuant to this Section 12.2, the restrictions set forth in the
balance of this Agreement shall not thereby lapse, and the Participant for
himself or herself, his or her heirs, legatees, executors, administrators and
other successors in interest, agrees that the Shares shall remain subject to
such restrictions. The following provisions shall apply to a repurchase under
this Section 12.2:

         (i) The per share repurchase price of the Shares to be sold to the
Company upon exercise of its option under this Section 12.2 shall be equal to
the Fair Market Value of each such Share determined in accordance with the Plan
as of the date of termination, Disability or death. Notwithstanding the
foregoing, in the event the Participant's termination is for cause (as defined
in the Plan), the Company shall have the right to repurchase the Shares at the
cash Exercise Price of the Option.

         (ii) The Company's option to repurchase the Participant's Shares in the
event of termination, Disability or death shall be valid for a period of sixty
(60) days commencing with the date of such termination, Disability or death.

         (iii) In the event the Company shall be entitled to and shall elect to
exercise its option to repurchase the Participant's Shares under this Section
12.2, the Company shall notify the Participant, or in case of death, his or her
representative, in writing of its intent to repurchase the Shares. Such written
notice may be mailed by the Company up to and including the last day of the time
period provided for in Section 12.2(ii) for exercise of the Company's option to
repurchase.

         (iv) The written notice to the Participant shall specify the address
at, and the time and date on, which payment of the repurchase price is to be
made (the "Closing"). The date specified shall not be less than ten (10) days
nor more than sixty (60) days from the date of the mailing of the notice, and
the Participant or his or her successor in interest with respect to the Shares
shall have no further rights as the owner thereof from and after the date
specified in the notice. At the Closing, the repurchase price shall be delivered
to the Participant or his or her successor in interest and the Shares being
purchased, duly endorsed for transfer, shall, to the extent that they are not
then in the possession of the Company, be delivered to the Company by the
Participant or his or her successor in interest.

         (v) If the Shares are not listed on a national securities exchange nor
traded in the over the counter market, then for the purposes of this Section
12.2, Fair Market Value shall mean such value as the Administrator, in good
faith, shall determine, and, provided, however, that if, the Participant objects
to the good faith determination of the Administrator, then the Participant and
the Company shall promptly and mutually select an investment banking firm,
certified public accountant or business appraisal firm (the "Independent
Appraiser") to determine the Fair Market Value. The Company shall promptly
furnish to the Independent Appraiser such information concerning the Company's
operations, assets and properties, financial condition, earnings, capitalization
and sales of its capital stock, and any offers or indication of interest


                                       6

<PAGE>

received by the Company, as the Independent Appraiser may request or the parties
may deem relevant. The Fair Market Value as determined by the Independent
Appraiser (which determination the Independent Appraiser shall be instructed to
render in writing within thirty (30) days following the selection of such
Independent Appraiser) shall be binding upon the Participant and the Company.
The fees and expenses of the Independent Appraiser shall be borne by the
Company.

         12.3 It shall be a condition precedent to the validity of any sale or
other transfer of any Shares by the Participant that the following restrictions
be complied with (except as hereinafter otherwise provided):

         (i)      No Shares owned by the Participant may be sold, pledged or
                  otherwise transferred (including by gift or devise) to any
                  person or entity, voluntarily, or by operation of law, except
                  in accordance with the terms and conditions hereinafter set
                  forth.

         (ii)     Before selling or otherwise transferring all or part of the
                  Shares, the Participant shall give written notice of such
                  intention to the Company, which notice shall include the name
                  of the proposed transferee, the proposed purchase price per
                  share, the terms of payment of such purchase price and all
                  other matters relating to such sale or transfer and shall be
                  accompanied by a copy of the binding written agreement of the
                  proposed transferee to purchase the Shares of the Participant.
                  Such notice shall constitute a binding offer by the
                  Participant to sell to the Company such number of the Shares
                  then held by the Participant as are proposed to be sold in the
                  notice at the monetary price per share designated in such
                  notice, payable on the terms offered to the Participant by the
                  proposed transferee (provided, however, that the Company shall
                  not be required to meet any non-monetary terms of the proposed
                  transfer, including, without limitation, delivery of other
                  securities in exchange for the Shares proposed to be sold).
                  The Company shall give written notice to the Participant as to
                  whether such offer has been accepted in whole by the Company
                  within twenty (20) days after its receipt of written notice
                  from the Participant. The Company may only accept such offer
                  in whole and may not accept such offer in part. Such
                  acceptance notice shall fix a time, location and date for the
                  closing on such purchase ("Closing Date") which shall not be
                  less than ten (10) nor more than sixty (60) days after the
                  giving of the acceptance notice. The place for such closing
                  shall be at the Company's principal office. At such closing,
                  the Participant shall accept payment as set forth herein and
                  shall deliver to the Company in exchange therefor certificates
                  for the number of Shares stated in the notice accompanied by
                  duly executed instruments of transfer.

         (iii)    If the Company shall fail to accept any such offer, the
                  Participant shall be free to sell all, but not less than all,
                  of the Shares set forth in his or her notice to the designated
                  transferee at the price and terms designated in the
                  Participant's notice, provided that (i) such sale is
                  consummated within six (6) months after the giving of notice
                  by the Participant to the Company as aforesaid, and (ii) the
                  transferee first agrees in writing to be bound by the
                  provisions of this Section 12 so that such


                                       7

<PAGE>

                  transferee (and all subsequent transferees) shall thereafter
                  only be permitted to sell or transfer the Shares in accordance
                  with the terms hereof. After the expiration of such six (6)
                  months, the provisions of this Section 12.3 shall again apply
                  with respect to any proposed voluntary transfer of the
                  Participant's Shares.

         (iv)     The restrictions on transfer contained in this Section 12.3
                  shall not apply to (a) transfers by the Participant to his or
                  her spouse or children or to a trust for the benefit of his or
                  her spouse or children, (b) transfers by the Participant to
                  his or her guardian or conservator, and (c) or transfers by
                  the Participant, in the event of his or her death, to his or
                  her executor(s) or administrator(s) or to trustee(s) under his
                  or her will (collectively, "Permitted Transferees"); provided
                  however, that in any such event the Shares so transferred in
                  the hands of each such Permitted Transferee shall remain
                  subject to this Agreement, and each such Permitted Transferee
                  shall so acknowledge in writing as a condition precedent to
                  the effectiveness of such transfer.

         (v)      The provisions of this Section 12.3 may be waived upon such
                  conditions as the Company may impose.

         12.4 In the event that the Participant or his or her successor in
interest fails to deliver the Shares to be repurchased by the Company under this
Agreement, the Company may elect (a) to establish a segregated account in the
amount of the repurchase price, such account to be turned over to the
Participant or his or her successor in interest upon delivery of such Shares,
and (b) immediately to take such action as is appropriate to transfer record
title of such Shares from the Participant to the Company and to treat the
Participant and such Shares in all respects as if delivery of such Shares had
been made as required by this Agreement. The Participant hereby irrevocably
grants the Company a power of attorney which shall be coupled with an interest
for the purpose of effectuating the preceding sentence.

         12.5 If the Company shall pay a stock dividend or declare a stock split
on or with respect to any of its Common Stock, or otherwise distribute
securities of the Company to the holders of the Common Stock, the number of
shares of stock or securities of the Company issued with respect to the Shares
then subject to the restrictions contained in this Agreement shall be added to
the Shares subject to the Company's rights to repurchase pursuant to this
Agreement. If the Company shall distribute to its stockholders shares of stock
of another corporation, the shares of stock of such other corporation,
distributed with respect to the Shares then subject to the restrictions
contained in this Agreement, shall be added to the Shares subject to the
Company's rights to repurchase pursuant to this Agreement.

         12.6 If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to a merger,
consolidation or capital reorganization, there shall be substituted for the
Shares then subject to the restrictions contained in this Agreement such amount
and kind of securities as are issued in such subdivision, combination,
reclassification, merger, consolidation


                                       8

<PAGE>

or capital reorganization in respect of the Shares subject immediately prior
thereto to the Company's rights to repurchase pursuant to this Agreement.

         12.7 The Company shall not be required to transfer any Shares on its
books which shall have been sold, assigned or otherwise transferred in violation
of this Agreement, or to treat as owner of such Shares, or to accord the right
to vote as such owner or to pay dividends to, any person or organization to
which any such Shares shall have been so sold, assigned or otherwise
transferred, in violation of this Agreement.

         12.8 The provisions of Sections 12.1, 12.2, and 12.3 shall terminate
upon the effective date of the initial public offering of the Company's
securities pursuant to the Securities Act.

         12.9 If, in connection with a registration statement filed by the
Company pursuant to the Securities Act relating to an underwritten public
offering of the Company's securities, the Company or its underwriter so
requests, the Participant will agree not to sell any Shares for a period not to
exceed 180 days following the effectiveness of such registration (but not
greater than the period applicable to all executive officers and directors of
the Company).

         12.10 The Participant acknowledges and agrees, except in connection
with the exercise of his Options, that neither the Company, its shareholders nor
its directors and officers, has any duty or obligation to disclose to the
Participant any material information regarding the business of the Company or
affecting the value of the Shares before, at the time of, or following a
termination of the employment of the Participant by the Company, including,
without limitation, any information concerning plans for the Company to make a
public offering of its securities or to be acquired by or merged with or into
another firm or entity.

         12.11 All certificates representing the Shares to be issued to the
Participant pursuant to this Agreement shall have endorsed thereon a legend
substantially as follows: "The shares represented by this certificate are
subject to restrictions set forth in a Non-Qualified Stock Option Agreement
dated ______________, 200_ with this Company, a copy of which Agreement is
available for inspection at the offices of the Company or will be made available
upon request."

         13.      NO OBLIGATION TO MAINTAIN A RELATIONSHIP.

         The Company is not, by the Plan or this Option, obligated to continue
the Participant as an employee, director or consultant of the Company.

         14.      OPTION IS NOT INTENDED TO BE AN ISO.

         The parties each intend that the Option be a Non-Qualified Stock Option
so that the Participant (or the Participant's Survivors) may not qualify for the
favorable tax treatment provided to holders of Options that meet the standards
of Section 422 of the Code. The Participant understands that neither the Company
nor any Affiliate is responsible to compensate him or her or otherwise make up
for the treatment of the Option as a Non-Qualified Option and not as an ISO. The
Participant should consult with the Participant's own tax advisors regarding the
tax effects of the Option, including, but not limited to, holding period
requirements.


                                       9

<PAGE>

         15.      NOTICES.

         Any notices required or permitted by the terms of this Agreement shall
be given by recognized courier service, facsimile, registered or certified mail,
return receipt requested, addressed as follows:

If to the Company:
                                    SmartBargains, Inc.
                                    10 Milk Street, 10th Floor
                                    Boston, MA 02108
                                    Attention:  Chief Financial Officer

If to the Participant:

                                    __________________________________________

                                    __________________________________________

                                    __________________________________________


or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service, or three business days following mailing by registered or
certified mail.

         16.      GOVERNING LAW.

         This Agreement shall be construed and enforced in accordance with the
law of the State of Delaware, without giving effect to the conflict of law
principles thereof.

         17.      BENEFIT OF AGREEMENT.

         Subject to the provisions of the Plan and the other provisions hereof,
this Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.

         18.      ENTIRE AGREEMENT.

         This Agreement, together with the Plan, embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this Agreement shall affect or
be used to interpret, change, or restrict the express terms and provisions of
this Agreement, provided, however, in any event, this Agreement shall be subject
to and governed by the Plan.


                                       10

<PAGE>

         19.      MODIFICATIONS AND AMENDMENTS.

         The terms and provisions of this Agreement may be modified or amended
as provided in the Plan.

         20.      WAIVERS AND CONSENTS.

         Except as provided in the Plan, the terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only by
written document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       11

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Participant has hereunto set
his or her hand, all as of the day and year first above written.

                                       SmartBargains, Inc.


                                       By: _______________________________
                                           Stephen M. Joseph
                                           Executive Vice President
                                           Chief Financial Officer


                                       ___________________________________
                                       Participant Signature



                                       12

<PAGE>

                                                                       Exhibit A


                NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION

                         [FORM FOR UNREGISTERED SHARES]

To: SmartBargains, Inc.


Ladies and Gentlemen:

         I hereby exercise my Non-Qualified Stock Option to purchase ___________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $_______ per share, pursuant to
and subject to the terms of that certain Non-Qualified Stock Option Agreement
between the undersigned and the Company dated _______________, 200_ (the "Stock
Option Agreement").

         I am aware that the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or any state securities
laws. I understand that the reliance by the Company on exemptions under the 1933
Act is predicated in part upon the truth and accuracy of the statements by me in
this Notice of Exercise.

         I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Shares; (2) I have had the opportunity to ask questions
concerning the Shares and the Company and all questions posed have been answered
to my satisfaction; (3) I have been given the opportunity to obtain any
additional information I deem necessary to verify the accuracy of any
information obtained concerning the Shares and the Company; and (4) I have such
knowledge and experience in financial and business matters that I am able to
evaluate the merits and risks of purchasing the Shares and to make an informed
investment decision relating thereto.

         I hereby represent and warrant that I am purchasing the Shares for my
own personal account for investment and not with a view to the sale or
distribution of all or any part of the Shares.

         I understand that because the Shares have not been registered under the
1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Shares cannot be sold unless the Shares are subsequently
registered under applicable federal and state securities laws or an exemption
from such registration requirements is available.

         I agree that I will in no event sell or distribute or otherwise dispose
of all or any part of the Shares unless (1) there is an effective registration
statement under the 1933 Act and applicable state securities laws covering any
such transaction involving the Shares or (2) the Company receives an opinion of
my legal counsel (concurred in by legal counsel for the


                                       13

<PAGE>

Company) stating that such transaction is exempt from registration or the
Company otherwise satisfies itself that such transaction is exempt from
registration.

         I consent to the placing of a legend on my certificate for the Shares
stating that the Shares have not been registered and setting forth the
restriction on transfer contemplated hereby and to the placing of a stop
transfer order on the books of the Company and with any transfer agents against
the Shares until the Shares may be legally resold or distributed without
restriction.

         I understand that at the present time Rule 144 of the Securities and
Exchange Commission (the "SEC") may not be relied on for the resale or
distribution of the Shares by me. I understand that the Company has no
obligation to me to register the sale of the Shares with the SEC and has not
represented to me that it will register the sale of the Shares.

         I understand the terms and restrictions on the right to dispose of the
Shares set forth in the Amended and Restated 2000 Employee, Director and
Consultant Stock Option Plan and the Non-Qualified Stock Option Agreement, which
I have carefully reviewed. I consent to the placing of a legend on my
certificate for the Shares referring to such restriction and the placing of stop
transfer orders until the Shares may be transferred in accordance with the terms
of such restrictions.

         I have considered the Federal, state and local income tax implications
of the exercise of my Option and the purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                       __________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ________________, as joint tenants with right of

survivorship and mail the certificate to me at the following address:


___________________________________

___________________________________

___________________________________



                                       14

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above is:

___________________________________

___________________________________

___________________________________


                                           Very truly yours,


                                           ____________________________________
                                           Participant (signature)


                                           ____________________________________
                                           Print Name


                                           ____________________________________
                                           Date


                                           ____________________________________
                                           Social Security Number


                                       15

<PAGE>

                                                                       Exhibit A

                NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION

                          [FORM FOR REGISTERED SHARES]

TO: SmartBargains, Inc.

IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time
as the Company has filed a Registration Statement with the Securities and
Exchange Commission under which the issuance of the Shares for which this
exercise is being made is registered and such Registration Statement remains
effective.

Ladies and Gentlemen:

         I hereby exercise my Non-Qualified Stock Option to purchase _________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $_______ per share, pursuant to
and subject to the terms of that certain Non-Qualified Stock Option Agreement
between the undersigned and the Company dated _______________, 200__.

         I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                    _________________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ____________________________, as joint tenants with right

of survivorship, and mail the certificate to me at the following address:


___________________________________

___________________________________

___________________________________


                                       16

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above, is:

___________________________________

___________________________________

___________________________________


                                           Very truly yours,


                                           ____________________________________
                                           Participant (signature)


                                           ____________________________________
                                           Print Name


                                           ____________________________________
                                           Date


                                           ____________________________________
                                           Social Security Number


                                       17

<PAGE>
                        INCENTIVE STOCK OPTION AGREEMENT
                                     ("MIP")

                               SMARTBARGAINS, INC.

         AGREEMENT made as of the _____ day of _________________, 200__ by and
between SmartBargains, Inc. (the "Company"), a Delaware corporation having a
principal place of business in Boston, Massachusetts and _____________ of
_________, __, an employee of the Company (the "Employee").

         WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock, $0.01 par value per share (the "Shares"),
under and for the purposes set forth in the Company's Amended and Restated 2000
Employee, Director and Consultant Stock Option Plan (the "Plan");

         WHEREAS, the Company and the Employee understand and agree that any
terms used and not defined herein have the same meanings as in the Plan; and

         WHEREAS, the Company and the Employee each intend that the Option
granted herein qualify as an ISO.

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:

         1.       GRANT OF OPTION.

         The Company hereby grants to the Employee the right and option to
purchase all or any part of an aggregate of _____ Shares, on the terms and
conditions and subject to all the limitations set forth herein and in the Plan,
which is incorporated herein by reference. The Employee acknowledges receipt of
a copy of the Plan.

         2.       PURCHASE PRICE.

         The purchase price of the Shares covered by the Option shall be $.36
per Share, subject to adjustment, as provided in the Plan, in the event of a
stock split, reverse stock split or other events affecting the holders of Shares
(the "Exercise Price"). Payment shall be made in accordance with Paragraph 7 of
the Plan.

         3.       EXERCISABILITY OF OPTION.

         Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall be immediately vested and exercisable.

         The foregoing rights are cumulative and are subject to the other terms
and conditions of this Agreement and the Plan, including without limitation
Section 16(B) of the Plan.


                                       1

<PAGE>

         4.       TERM OF OPTION.

         The Option shall terminate ten (10) years from the date of this
Agreement or, if the Employee owns as of the date hereof more than ten percent
(10%) of the total combined voting power of all classes of capital stock of the
Company or an Affiliate, five (5) years from the date of this Agreement, but
shall be subject to earlier termination as provided herein or in the Plan.

         If the Employee ceases to be an employee of the Company or of an
Affiliate (for any reason other than the death or Disability of the Employee or
termination of the Employee's employment for "cause" as defined in the Plan),
the Option may be exercised, if it has not previously terminated, within one (1)
month after the date the Employee ceases to be an employee of the Company or an
Affiliate, or within the originally prescribed term of the Option, whichever is
earlier, but may not be exercised thereafter. In such event, the Option shall be
exercisable only to the extent that the Option has become exercisable and is in
effect at the date of such cessation of employment.

         Notwithstanding the foregoing, in the event of the Employee's
Disability or death within one (1) month after the termination of employment,
the Employee or the Employee's Survivors may exercise the Option within one (1)
year after the date of the Employee's termination of employment, but in no event
after the date of expiration of the term of the Option.

         In the event the Employee's employment is terminated by the Employee's
employer for "cause" as defined in the Plan, the Employee's right to exercise
any unexercised portion of this Option shall cease as of such termination, and
this Option shall thereupon terminate. Notwithstanding anything herein to the
contrary, if subsequent to the Employee's termination as an employee, but prior
to the exercise of the Option, the Board of Directors of the Company determines
that, either prior or subsequent to the Employee's termination, the Employee
engaged in conduct which would constitute "cause," then the Employee shall
immediately cease to have any right to exercise the Option and this Option shall
thereupon terminate.

         In the event of the Disability of the Employee, as determined in
accordance with the Plan, the Option shall be exercisable within one (1) year
after the date of Disability or, if earlier, within the term originally
prescribed by the Option. In such event, the Option shall be exercisable:

         (a)      to the extent exercisable but not exercised as of the date of
                  Disability; and

         (b)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Employee not become Disabled prior to the end of the
                  accrual period which next ends following the date of
                  Disability. The proration shall be based upon the number of
                  days during the accrual period prior to the date of
                  Disability.

         In the event of the death of the Employee while an employee of the
Company or of an Affiliate, the Option shall be exercisable by the Participant's
Survivors within one (1) year after the date of death of the Employee or, if
earlier, within the originally prescribed term of the Option. In such event, the
Option shall be exercisable:


                                       2

<PAGE>

         (x)      to the extent exercisable but not exercised as of the date of
                  death; and

         (y)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion of any
                  additional rights to exercise the Option as would have accrued
                  had the Employee not died prior to the end of the accrual
                  period which next ends following the date of death. The
                  proration shall be based upon the number of days during the
                  accrual period prior to the Employee's death.

For the purposes of this Agreement, "cause" shall mean dishonesty with respect
to the Company or any affiliate, insubordination, substantial malfeasance or
non feasance of duty, unauthorized disclosure of confidential information and
conduct substantially prejudicial to the business of the Company or any
affiliate. The determination of the Board of Directors as to the existence of
"cause" will be conclusive on the Employee and the Company, provided with the
opportunity to be heard by the Board.


         5.       METHOD OF EXERCISING OPTION.

         Subject to the terms and conditions of this Agreement, the Option may
be exercised by written notice to the Company at its principal executive office,
in substantially the form of Exhibit A attached hereto. Such notice shall state
the number of Shares with respect to which the Option is being exercised and
shall be signed by the person exercising the Option. Payment of the purchase
price for such Shares shall be made in accordance with Paragraph 7 of the Plan.
The Company shall deliver a certificate or certificates representing such Shares
as soon as practicable after the notice shall be received, provided, however,
that the Company may delay issuance of such Shares until completion of any
action or obtaining of any consent, which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws). The certificate or certificates for the Shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and another person
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised, pursuant to Section 4 hereof, by any person
or persons other than the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.

         6.       PARTIAL EXERCISE.

         Exercise of this Option to the extent above stated may be made in part
at any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.

         7.       NON-ASSIGNABILITY.

         The Option shall not be transferable by the Employee otherwise than by
will or by the laws of descent and distribution. The Option shall be
exercisable, during the Employee's lifetime, only by the Employee (or, in the
event of legal incapacity or incompetency, by the Employee's guardian or
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option or of any rights
granted hereunder contrary to the provisions of this Section 7, or the levy of
any attachment or similar process upon the Option shall be null and void.


                                       3

<PAGE>

         8.       NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

         The Employee shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company's share register in the name of the Employee. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

         9.       CAPITAL CHANGES AND BUSINESS SUCCESSIONS.

         The Plan contains provisions covering the treatment of Options in a
number of contingencies such as stock splits and mergers. Provisions in the Plan
for adjustment with respect to stock subject to Options and the related
provisions with respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by reference.

         10.      TAXES.

         The Employee acknowledges that any income or other taxes due from him
or her with respect to this Option or the Shares issuable pursuant to this
Option shall be the Employee's responsibility.

         In the event of a Disqualifying Disposition (as defined in Section 15
below) or if the Option is converted into a Non-Qualified Option and such
Non-Qualified Option is exercised, the Company may withhold from the Employee's
remuneration, if any, the appropriate amount of federal, state and local
withholding taxes attributable to such amount that is considered compensation
includible in such person's gross income. At the Company's discretion, the
amount required to be withheld may be withheld in cash from such remuneration,
or in kind from the Shares otherwise deliverable to the Employee on exercise of
the Option. The Employee further agrees that, if the Company does not withhold
an amount from the Employee's remuneration sufficient to satisfy the Company's
income tax withholding obligation, the Employee will reimburse the Company on
demand, in cash, for the amount under-withheld.

         11.      PURCHASE FOR INVESTMENT.

         Unless the offering and sale of the Shares to be issued upon the
particular exercise of the Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the
"Securities Act"), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been
fulfilled:

         (a)      The person(s) who exercise the Option shall warrant to the
                  Company, at the time of such exercise, that such person(s) are
                  acquiring such Shares for their own respective accounts, for
                  investment, and not with a view to, or for sale in connection
                  with, the distribution of any such Shares, in which event the
                  person(s) acquiring such Shares shall be bound by the
                  provisions of the following legend which shall be endorsed
                  upon the certificate(s) evidencing the Shares issued pursuant
                  to such exercise:


                                       4

<PAGE>

                           "The shares represented by this certificate have been
                           taken for investment and they may not be sold or
                           otherwise transferred by any person, including a
                           pledgee, unless (1) either (a) a Registration
                           Statement with respect to such shares shall be
                           effective under the Securities Act of 1933, as
                           amended, or (b) the Company shall have received an
                           opinion of counsel satisfactory to it that an
                           exemption from registration under such Act is then
                           available, and (2) there shall have been compliance
                           with all applicable state securities laws;" and

         (b)      If the Company so requires, the Company shall have received an
                  opinion of its counsel that the Shares may be issued upon such
                  particular exercise in compliance with the 1933 Act without
                  registration thereunder. Without limiting the generality of
                  the foregoing, the Company may delay issuance of the Shares
                  until completion of any action or obtaining of any consent,
                  which the Company deems reasonably necessary under any
                  applicable law (including without limitation state securities
                  or "blue sky" laws).

         12.      RESTRICTIONS ON TRANSFER OF SHARES.

         12.1 The Shares acquired by the Employee pursuant to the exercise of
the Option granted hereby shall not be transferred by the Employee except as
permitted herein.

         12.2 In the event of the Employee's termination of employment for any
reason, Disability or death, the Company shall have the option, but not the
obligation, to repurchase all or any part of the Shares issued pursuant to this
Agreement (including, without limitation, Shares purchased after termination of
employment, Disability or death in accordance with Section 4 hereof). In the
event the Company does not, upon the termination, Disability or death of the
Employee (as described above), exercise its option pursuant to this Section
12.2, the restrictions set forth in the balance of this Agreement shall not
thereby lapse, and the Employee for himself or herself, his or her heirs,
legatees, executors, administrators and other successors in interest, agrees
that the Shares shall remain subject to such restrictions. The following
provisions shall apply to a repurchase under this Section 12.2:

         (i) The per share repurchase price of the Shares to be sold to the
Company upon exercise of its option under this Section 12.2 shall be equal to
the Fair Market Value of each such Share determined in accordance with the Plan
as of the date of termination, Disability or death. Notwithstanding the
foregoing, in the event the Participant's termination of employment is for
cause, the Company shall have the right to repurchase the Shares at the cash
Exercise Price of the Option.

         (ii) The Company's option to repurchase the Employee's Shares in the
event of termination of employment, Disability or death shall be valid for a
period of sixty (60) days commencing with the date of such termination of
employment.

         (iii) In the event the Company shall be entitled to and shall elect to
exercise its option to repurchase the Employee's Shares under this Section 12.2,
the Company shall notify the Employee, or in case of death, his or her
representative, in writing of its intent to repurchase the


                                       5

<PAGE>

Shares. Such written notice may be mailed by the Company up to and including the
last day of the time period provided for in Section 12.2(ii) for exercise of the
Company's option to repurchase.

         (iv) The written notice to the Employee shall specify the address at,
and the time and date on, which payment of the repurchase price is to be made
(the "Closing"). The date specified shall not be less than ten (10) days nor
more than sixty (60) days from the date of the mailing of the notice, and the
Employee or his or her successor in interest with respect to the Shares shall
have no further rights as the owner thereof from and after the date specified in
the notice. At the Closing, the repurchase price shall be delivered to the
Employee or his or her successor in interest and the Shares being purchased,
duly endorsed for transfer, shall, to the extent that they are not then in the
possession of the Company, be delivered to the Company by the Employee or his or
her successor in interest.

         (v) If the Shares are not listed on a national securities exchange nor
traded in the over the counter market, then for the purposes of this Section
12.2, Fair Market Value shall mean such value as the Administrator, in good
faith, shall determine, and, provided, however, that if, the Employee objects to
the good faith determination of the Administrator, then the Employee and the
Company shall promptly and mutually select an investment banking firm, certified
public accountant or business appraisal firm (the "Independent Appraiser") to
determine the Fair Market Value. The Company shall promptly furnish to the
Independent Appraiser such information concerning the Company's operations,
assets and properties, financial condition, earnings, capitalization and sales
of its capital stock, and any offers or indication of interest received by the
Company, as the Independent Appraiser may request or the parties may deem
relevant. The Fair Market Value as determined by the Independent Appraiser
(which determination the Independent Appraiser shall be instructed to render in
writing within thirty (30) days following the selection of such Independent
Appraiser) shall be binding upon the Employee and the Company. The fees and
expenses of the Independent Appraiser shall be borne by the Company.

         12.3 It shall be a condition precedent to the validity of any sale or
other transfer of any Shares by the Employee that the following restrictions be
complied with (except as hereinafter otherwise provided):

         (i)      No Shares owned by the Employee may be sold, pledged or
                  otherwise transferred (including by gift or devise) to any
                  person or entity, voluntarily, or by operation of law, except
                  in accordance with the terms and conditions hereinafter set
                  forth.

         (ii)     Before selling or otherwise transferring all or part of the
                  Shares, the Employee shall give written notice of such
                  intention to the Company, which notice shall include the name
                  of the proposed transferee, the proposed purchase price per
                  share, the terms of payment of such purchase price and all
                  other matters relating to such sale or transfer and shall be
                  accompanied by a copy of the binding written agreement of the
                  proposed transferee to purchase the Shares of the Employee.
                  Such notice shall constitute a binding offer by the Employee
                  to sell to the Company such number of the Shares then held by
                  the Employee as are proposed to be sold in the notice at the
                  monetary price per share designated in such notice, payable on
                  the terms offered to the Employee by the proposed transferee


                                       6

<PAGE>

                  (provided, however, that the Company shall not be required to
                  meet any non-monetary terms of the proposed transfer,
                  including, without limitation, delivery of other securities in
                  exchange for the Shares proposed to be sold). The Company
                  shall give written notice to the Employee as to whether such
                  offer has been accepted in whole by the Company within twenty
                  (20) days after its receipt of written notice from the
                  Employee. The Company may only accept such offer in whole and
                  may not accept such offer in part. Such acceptance notice
                  shall fix a time, location and date for the closing on such
                  purchase ("Closing Date") which shall not be less than ten
                  (10) nor more than sixty (60) days after the giving of the
                  acceptance notice. The place for such closing shall be at the
                  Company's principal office. At such closing, the Employee
                  shall accept payment as set forth herein and shall deliver to
                  the Company in exchange therefor certificates for the number
                  of Shares stated in the notice accompanied by duly executed
                  instruments of transfer.

         (iii)    If the Company shall fail to accept any such offer, the
                  Employee shall be free to sell all, but not less than all, of
                  the Shares set forth in his or her notice to the designated
                  transferee at the price and terms designated in the Employee's
                  notice, provided that (i) such sale is consummated within six
                  (6) months after the giving of notice by the Employee to the
                  Company as aforesaid, and (ii) the transferee first agrees in
                  writing to be bound by the provisions of this Section 12 so
                  that such transferee (and all subsequent transferees) shall
                  thereafter only be permitted to sell or transfer the Shares in
                  accordance with the terms hereof. After the expiration of such
                  six (6) months, the provisions of this Section 12.3 shall
                  again apply with respect to any proposed voluntary transfer of
                  the Employee's Shares.

         (iv)     The restrictions on transfer contained in this Section 12.3
                  shall not apply to (a) transfers by the Employee to his or her
                  spouse or children or to a trust for the benefit of his or her
                  spouse or children, (b) transfers by the Employee to his or
                  her guardian or conservator, and (c) or transfers by the
                  Employee, in the event of his or her death, to his or her
                  executor(s) or administrator(s) or to trustee(s) under his or
                  her will (collectively, "Permitted Transferees"); provided
                  however, that in any such event the Shares so transferred in
                  the hands of each such Permitted Transferee shall remain
                  subject to this Agreement, and each such Permitted Transferee
                  shall so acknowledge in writing as a condition precedent to
                  the effectiveness of such transfer.

         (v)      The provisions of this Section 12.3 may be waived upon such
                  conditions as the Company may impose.

         12.4 In the event that the Employee or his or her successor in interest
fails to deliver the Shares to be repurchased by the Company under this
Agreement, the Company may elect (a) to establish a segregated account in the
amount of the repurchase price, such account to be turned over to the Employee
or his or her successor in interest upon delivery of such Shares, and (b)
immediately to take such action as is appropriate to transfer record title of
such Shares from the Employee to the Company and to treat the Employee and such
Shares in all respects as if delivery of such Shares had been made as required
by this Agreement. The Employee hereby


                                       7

<PAGE>

irrevocably grants the Company a power of attorney which shall be coupled with
an interest for the purpose of effectuating the preceding sentence.

         12.5 If the Company shall pay a stock dividend or declare a stock split
on or with respect to any of its Common Stock, or otherwise distribute
securities of the Company to the holders of its Common Stock, the number of
shares of stock or other securities of Company issued with respect to the shares
then subject to the restrictions contained in this Agreement shall be added to
the Shares subject to the Company's rights to repurchase pursuant to this
Agreement. If the Company shall distribute to its stockholders shares of stock
of another corporation, the shares of stock of such other corporation,
distributed with respect to the Shares then subject to the restrictions
contained in this Agreement, shall be added to the Shares subject to the
Company's rights to repurchase pursuant to this Agreement.

         12.6 If the outstanding shares of Common Stock of the Company shall be
subdivided into a greater number of shares or combined into a smaller number of
shares, or in the event of a reclassification of the outstanding shares of
Common Stock of the Company, or if the Company shall be a party to a merger,
consolidation or capital reorganization, there shall be substituted for the
Shares then subject to the restrictions contained in this Agreement such amount
and kind of securities as are issued in such subdivision, combination,
reclassification, merger, consolidation or capital reorganization in respect of
the Shares subject immediately prior thereto to the Company's rights to
repurchase pursuant to this Agreement.

         12.7 The Company shall not be required to transfer any Shares on its
books which shall have been sold, assigned or otherwise transferred in violation
of this Agreement, or to treat as owner of such Shares, or to accord the right
to vote as such owner or to pay dividends to, any person or organization to
which any such Shares shall have been so sold, assigned or otherwise
transferred, in violation of this Agreement.

         12.8 The provisions of Sections 12.1, 12.2 and 12.3 shall terminate
upon the effective date of the initial public offering of the Company's
securities pursuant to the Securities Act.

         12.9 If, in connection with a registration statement filed by the
Company pursuant to the Securities Act relating to an underwritten public
offering of the Company's securities, the Company or its underwriter so
requests, the Employee will agree not to sell any Shares for a period not to
exceed 180 days following the effectiveness of such registration (but not
greater than the period applicable to all executive officers and directors of
the Company).

         12.10 The Employee acknowledges and agrees, except in connection with
the exercise of his Options, that neither the Company, its shareholders nor its
directors and officers, has any duty or obligation to disclose to the Employee
any material information regarding the business of the Company or affecting the
value of the Shares before, at the time of, or following a termination of the
employment of the Employee by the Company, including, without limitation, any
information concerning plans for the Company to make a public offering of its
securities or to be acquired by or merged with or into another firm or entity.

         12.11 All certificates representing the Shares to be issued to the
Employee pursuant to this Agreement shall have endorsed thereon a legend
substantially as follows: "The shares represented by this certificate are
subject to restrictions set forth in an Incentive Stock Option


                                       8

<PAGE>

Agreement dated _____________, 200__ with this Company, a copy of which
Agreement is available for inspection at the offices of the Company or will be
made available upon request."

         13.      NO OBLIGATION TO EMPLOY.

         The Company is not, by the Plan or this Option, obligated to continue
the Employee as an employee of the Company.

         14.      OPTION IS INTENDED TO BE AN ISO.

         The parties each intend that the Option be an ISO so that the Employee
(or the Employee's Survivors) may qualify for the favorable tax treatment
provided to holders of Options that meet the standards of Section 422 of the
Code. Any provision of this Agreement or the Plan which conflicts with the Code
so that this Option would not be deemed an ISO is null and void and any
ambiguities shall be resolved so that the Option qualifies as an ISO.
Nonetheless, if the Option is determined not to be an ISO, the Employee
understands that neither the Company nor any Affiliate is responsible to
compensate him or her or otherwise make up for the treatment of the Option as a
Non-qualified Option and not as an ISO. The Employee should consult with the
Employee's own tax advisors regarding the tax effects of the Option and the
requirements necessary to obtain favorable tax treatment under Section 422 of
the Code, including, but not limited to, holding period requirements.

         15.      NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

         The Employee agrees to notify the Company in writing immediately after
the Employee makes a Disqualifying Disposition of any of the Shares acquired
pursuant to the exercise of the Option. A Disqualifying Disposition is defined
in Section 424(c) of the Code and includes any disposition (including any sale)
of such Shares before the later of (a) two years after the date the Employee was
granted the Option or (b) one year after the date the Employee acquired Shares
by exercising the Option, except as otherwise provided in Section 424(c) of the
Code. If the Employee has died before the Shares are sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.


                                       9

<PAGE>

         16.      NOTICES.

         Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:

If to the Company:                  SmartBargains, Inc.
                                    10 Milk Street, 10th Floor
                                    Boston, MA  02108
                                    Attention:  Chief Financial Officer


If to the Employee:



or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service, or three business days following mailing by registered or
certified mail.

         17.      GOVERNING LAW.

         This Agreement shall be construed and enforced in accordance with the
law of the State of Delaware, without giving effect to the conflict of law
principles thereof.

         18.      BENEFIT OF AGREEMENT.

         Subject to the provisions of the Plan and the other provisions hereof,
this Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.

         19.      ENTIRE AGREEMENT.

         This Agreement, together with the Plan, embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this Agreement shall affect or
be used to interpret, change, or restrict the express terms and provisions of
this Agreement, provided, however, in any event, this Agreement shall be subject
to and governed by the Plan.

         20.      MODIFICATIONS AND AMENDMENTS.

         The terms and provisions of this Agreement may be modified or amended
as provided in the Plan.


                                       10

<PAGE>

         21.      WAIVERS AND CONSENTS.

         Except as provided in the Plan, the terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only by
written document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Employee has hereunto set his
or her hand, all as of the day and year first above written.


                                        SmartBargains, Inc.



                                        By: _______________________________
                                            Stephen M. Joseph
                                            Executive Vice President
                                            Chief Financial Officer




                                        __________________________________
                                        Employee


                                       11

<PAGE>

                                                                       Exhibit A

                  NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

                         [FORM FOR UNREGISTERED SHARES]

To: SmartBargains, Inc.


Ladies and Gentlemen:

         I hereby exercise my Incentive Stock Option to purchase ___________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $____ per share, pursuant to and
subject to the terms of that certain Incentive Stock Option Agreement between
the undersigned and the Company dated ________________, 200__.

         I am aware that the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or any state securities
laws. I understand that the reliance by the Company on exemptions under the 1933
Act is predicated in part upon the truth and accuracy of the statements by me in
this Notice of Exercise.

         I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Shares; (2) I have had the opportunity to ask questions
concerning the Shares and the Company and all questions posed have been answered
to my satisfaction; (3) I have been given the opportunity to obtain any
additional information I deem necessary to verify the accuracy of any
information obtained concerning the Shares and the Company; and (4) I have such
knowledge and experience in financial and business matters that I am able to
evaluate the merits and risks of purchasing the Shares and to make an informed
investment decision relating thereto.

         I hereby represent and warrant that I am purchasing the Shares for my
own personal account for investment and not with a view to the sale or
distribution of all or any part of the Shares.

         I understand that because the Shares have not been registered under the
1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Shares cannot be sold unless the Shares are subsequently
registered under applicable federal and state securities laws or an exemption
from such registration requirements is available.

         I agree that I will in no event sell or distribute or otherwise dispose
of all or any part of the Shares unless (1) there is an effective registration
statement under the 1933 Act and applicable state securities laws covering any
such transaction involving the Shares or (2) the Company receives an opinion of
my legal counsel (concurred in by legal counsel for the Company) stating that
such transaction is exempt from registration or the Company otherwise satisfies
itself that such transaction is exempt from registration.


                                       12

<PAGE>

         I consent to the placing of a legend on my certificate for the Shares
stating that the Shares have not been registered and setting forth the
restriction on transfer contemplated hereby and to the placing of a stop
transfer order on the books of the Company and with any transfer agents against
the Shares until the Shares may be legally resold or distributed without
restriction.

         I understand that at the present time Rule 144 of the Securities and
Exchange Commission (the "SEC") may not be relied on for the resale or
distribution of the Shares by me. I understand that the Company has no
obligation to me to register the sale of the Shares with the SEC and has not
represented to me that it will register the sale of the Shares.

         I understand the terms and restrictions on the right to dispose of the
Shares set forth in the Amended and Restated 2000 Employee, Director and
Consultant Stock Option Plan and the Incentive Stock Option Agreement, both of
which I have carefully reviewed. I consent to the placing of a legend on my
certificate for the Shares referring to such restriction and the placing of stop
transfer orders until the Shares may be transferred in accordance with the terms
of such restrictions.

         I have considered the Federal, state and local income tax implications
of the exercise of my Option and the purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                  ____________________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ________________, as joint tenants with right of

survivorship and mail the certificate to me at the following address:


________________________________________

________________________________________

________________________________________


                                       13

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above is:

________________________________________

________________________________________

________________________________________



                                      Very truly yours,



                                      _____________________________________
                                      Employee (signature)


                                      _____________________________________
                                      Print Name


                                      _____________________________________
                                      Date


                                      _____________________________________
                                      Social Security Number


                                       14

<PAGE>

                                                                       Exhibit A

                  NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

                          [FORM FOR REGISTERED SHARES]

TO: SmartBargains, Inc.

IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time
as the Company has filed a Registration Statement with the Securities and
Exchange Commission under which the issuance of the Shares for which this
exercise is being made is registered and such Registration Statement remains
effective.

Ladies and Gentlemen:

         I hereby exercise my Incentive Stock Option to purchase _________
shares (the "Shares") of the common stock, $.01 par value, of SmartBargains,
Inc. (the "Company"), at the exercise price of $________ per share, pursuant to
and subject to the terms of that certain Incentive Stock Option Agreement
between the undersigned and the Company dated _______________, 200__.

         I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                      ____________________________________

         Please issue the stock certificate for the Shares (check one):

         |_| to me; or

         |_| to me and ____________________________, as joint tenants with right

of survivorship, and mail the certificate to me at the following address:


________________________________________

________________________________________

________________________________________


                                       15

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above, is:

________________________________________

________________________________________

________________________________________


                                      Very truly yours,



                                      _____________________________________
                                      Employee (signature)


                                      _____________________________________
                                      Print Name


                                      _____________________________________
                                      Date


                                      _____________________________________
                                      Social Security Number


                                       16